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As I Explicitly Forwarned, Greece Is Well On Its Way To Default, and Previously Published Numbers Were Waaaayyy Too Optimistic!
As was literally guaranteed by the BoomBustBlog analysis, Greece is
well on its way to default, or at least the acceptance of significant
aid in an (probably futile) attempt to avoid default. For a refresher,
see “Greek
Crisis Is Over, Region Safe”, Prodi Says – I say Liar, Liar, Pants on
Fire!. Subscribers should reference the Greece
Public Finances Projections. Of particular note is how accurate we
have been in forecasting the nonsensical optimism embedded in the Greek
Government’s economic numbers, see Lies,
Damn Lies, and Sovereign Truths: Why the Euro is Destined to
Collapse!. Now, let’s peruse the news of the morning…
In Bloomberg: Greece,
Ireland Lead Euro-Area Budget Deficit Widening to Double EU Limit
April 22 (Bloomberg) — The euro area’s budget
deficit widened to more than double the European Union’s 3 percent
limit in 2009, led by Greece and Ireland. I explicitly
warned that these two countries were at the top of the risk chain
throughout the year, culminated with a forensic report on Ireland. See Many
Institutions Believe Ireland To Be A Model of Austerity Implementation
But the Facts Beg to Differ! Subscribers should reference
Ireland public finances projections. Ireland is in a particularly
precarious position, potentially more so that Greece!
The total budget
gap for the 16-nation euro region widened to 6.3 percent of gross
domestic product last year, the biggest since the introduction of the
euro in 1999, from 2 percent in 2008, the EU’s Luxembourg-based
statistics office said today. At 14.3 percent of GDP, Ireland had the
largest shortfall, while Greece’s deficit was 13.6 percent. I’m not
going to say I told you so!
… Overall government
debt across the euro region swelled to 78.7 percent of GDP last
year from 69.4 percent in 2008, the statistics office said.
Ireland and Greece
The European Commission in Brussels had
previously forecast the euro region’s deficit to reach 6.4 percent of
GDP in 2009, with Ireland and Greece at 12.5 percent and 12.7 percent,
respectively. In 2010, the euro region’s deficit may widen to a record
6.9 percent of GDP, while state debt is seen surging to 84 percent of
output, according to EU forecasts that are due to be revised on May 6.
The IMF said earlier this week that the
main sources of sovereign risk in the 16-member euro region have shifted
to reflect market concerns about fiscal sustainability. Greece and
Portugal have become the “main contributors to inter-sovereign risk
transfer,” the Washington-based fund said.
“Greece is a wake-up call,” Jose
Vinals, director of the IMF’s monetary and capital markets
department, told reporters on April 19. “What we are saying is ‘do not
let the financial situation get out of hand and undertake the necessary
measures precisely to remain on the safe side.”
Yeah, right! As if we are going to believe what the EU and IMF have
to say… As excerpted from Lies,
Damn Lies, and Sovereign Truths: Why the Euro is Destined to
Collapse!
and the EU on goverment balance??? Way, way, way off.
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!…
You
are going to get negative surprises from Greece for quite some time,
since they have been lying about their conditions for just as long.
For anyone so inclined to refer BoomBustBlog’s investigative analysis
to the reporters who penned the Bloomberg piece, you can reach them
here: Simone
Meier in Dublin at smeier@bloombert.net.
Maybe we can get my “version of the Truth”, (you know, the mathematical
edition) published in the mainstream!
The Pan-European Sovereign Debt Crisis, to date:
- The
Coming Pan-European Sovereign Debt Crisis – introduces the crisis
and identified it as a pan-European problem, not a localized one. - What
Country is Next in the Coming Pan-European Sovereign Debt Crisis? –
illustrates the potential for the domino effect - The
Pan-European Sovereign Debt Crisis: If I Were to Short Any Country,
What Country Would That Be.. – attempts to illustrate the highly
interdependent weaknesses in Europe’s sovereign nations can effect even
the perceived “stronger” nations. - The
Coming Pan-European Soverign Debt Crisis, Pt 4: The Spread to Western
European Countries - The
Depression is Already Here for Some Members of Europe, and It Just
Might Be Contagious! - The
Beginning of the Endgame is Coming??? - I
Think It’s Confirmed, Greece Will Be the First Domino to Fall - Smoking
Swap Guns Are Beginning to Litter EuroLand, Sovereign Debt Buyer
Beware! - Financial
Contagion vs. Economic Contagion: Does the Market Underestimate the
Effects of the Latter? - “Greek
Crisis Is Over, Region Safe”, Prodi Says – I say Liar, Liar, Pants on
Fire! - Germany
Finally Comes Out and Says, “We’re Not Touching Greece” – Well, Sort
of… - The Greece and the Greek Banks Get the Word “First”
Etched on the Side of Their Domino - As
I Warned Earlier, Latvian Government Collapses Exacerbating Financial
Crisis - Once
You Catch a Few EU Countries “Stretching the Truth”, Why Should You
Trust the Rest? - Lies,
Damn Lies, and Sovereign Truths: Why the Euro is Destined to Collapse! - Ovebanked,
Underfunded, and Overly Optimistic: The New Face of Sovereign Europe - Moody’s
Follows Suit Behind Our Analysis and Downgrades 4 Greek Banks - The
EU Has Rescued Greece From the Bond Vigilantes,,, April Fools!!! - How
BoomBustBlog Research Intersects with That of the IMF: Greece in the
Spotlight - Grecian
News and its Relevance to My Analysis - A
Summary and Related Thoughts on the IMF’s “Strategies for Fiscal
Consolidation in the Post-Crisis - Euro-Gossip
Debunked, Courtesy of Trichet and the IMF! - Greek
Soap Opera Update: Back to the Bailout That Was Never Needed? - Many Institutions
Believe Ireland To Be A Model of Austerity Implementation But the
Facts Beg to Differ!
Latest Euro-related subscription content:
Ireland public finances projections(Global Macro, Trades & Strategy)
Spain public finances projections_033010(Global Macro, Trades & Strategy)
KDUS – member contribution analysis(Biotech)
UK Public Finances March 2010(Global Macro, Trades & Strategy)
Italy public finances projection(Global Macro, Trades & Strategy)
Greece Public Finances Projections(Global Macro, Trades & Strategy)
ALt-A and Subprime Loan Performance Summaryfor Q4-2009
(Residentail Real Estate)
Q4-2009 Subprime Data Sheet(Residentail Real Estate)
Q4-2009 Alt-A Data Sheet(Residentail Real Estate)
Mechel (MTLR) Overview, pt2(Industrial & Manufacturing)
Mechel (MTLR)(Industrial & Manufacturing)
Banks exposed to Central and Eastern Europe(Commercial & Investment Banks)
Greek Banking Fundamental Tear Shee(Commercial & Investment Banks)
Italian Banking Macro-FundamentalDiscussion Not
(Commercial & Investment Banks)
Spanish Banking Macro Discussion Note(Commercial & Investment Banks)
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Good job Reggie, spot on. What shocked me the most was this morning where they downgraded Greece's debt yet again. If I was a person that bought Greek debt recently or a few months ago, I would sell it at a minimal loss because I have a strange feeling that this country is about to Default with or without IMF help.
This is good analysis. Thanks!
i guess you wouldn't expect miss america to know that restructuring is a variety of default.
Tom, Default would trigger a credit event. The semantics, are what separates Lehman from Merrill.
THE GREEK ESCAPE!:
http://williambanzai7.blogspot.com/2010/04/greek-escape.html
Reggie, what nonsense. They will be bailed out. Probably by the US in some under the table deal. Nobody defaults that has a printer.
As for you end-of-world nut balls... go to Singapore or go anywhere you like. There was no mad max during the great depression, nor in most countries that actually did fail. Stop thinking movies are real and make some sense. And until gold becomes a legal currency again, forget about that as well.
First Greece most certainly can default. It's the "so long and thanks for all the fish" argument that states "now the euro's your problem, not ours" with a "I never wanted to be in this stupid club anyways in your response to your "liar, liar pants on fire" comment about me." Good analysis--but what is the signifcance Reggie? This is the question you don't ask, namely, WHY SHOULD I CARE ABOUT GREECE and more importantly WHY DO YOU? Cleary what "you are saying" is "go long MS and Goldman" if you "care about Greece." In my case I say "go long aircraft carrier battle groups" in "caring about Greece." Of course that may actually MEAN caring about Greece and "who wants to do that"?
My next piece on the European crisis will outline why anyone stateside should care about Greece. For starters, if Greece defaults, you could probably kiss a few retailers and REITs goodbye. If you thought it was hard to rollover over-encumbered, bad debt after Lehman collapsed...
no one cares so stop these posts............we are in the land of make believe and every PM is playing along with the govt game......
Hey Reggie.
They will not “default”. They will “restructure”, pushing out maturities, with haircuts across the board. The IMF will be tapped for support, and EUR countries will give in to funding just after they have made a large enough stink that they “are not happy” but “willing”. They will run the same moral hazard we fell trap to.
Hellasious of Sudden Debt is spot on, and his numbers show 67% haircut. I love his numbers, but disagree with the willingness of Greek citizens to accept an RE tax. …thus I feel like the true funding of this EUR crisis will be funded through new debt securitized against UST’s Collateral that the world now hold TONS of. The appreciation of the USD will float that loan on it’s crossover to EUR at no loss. Ponzi financing continues. Kick the can down the road. Push the string some more.
All the best,
Miss America – RH
p.s. Don’t play in to the blogging haters. I saw you get into it with A$$-hat the other day. By acknowledging his rips, it diminishes the perception of your perceived confidence. (and this is a confidence game) …also, the people that rip on you needing an editor, don’t get how hard it is to produce this stuff. (especially when your doing it pro bono.) ….and last comment, take it or leave it, is I noticed other readers voicing complaints about your current works containing too much of you past (prophetic) claims. Like I said. You do good work, and I, and many of your readers know your history so as a current reader, it gets tough to read. (my suggestion about cutting that stuff was because if It bothered me, then it probably bothered others. …and as your audience grows, I’d hate to see you lose any of that audience to the same complaint)
Thanks for the constuctive input. Don't think of the links as prophetic claims, but as a roadmap to how we got to where we are now. For those who don't read me regularly (99.99% of the world), it provides background and depth - not to mention a solid anchor to my site for those who steal content.
I will take your suggestions to heart though. They make plenty of sense.
RE: restructuring, etc., It doesn't really matter what you call not paying the full amount owed on contracted schedule, it is an "effective" default. Wiser investors should know better (even through many don't) than to get into the semantics game.
You're on the money, Reggie.
It's interesting this tug-of-war between growing doubts that Europe can avoid sovereign debt crisis contagion and growing confidence that the US reflation and stimulus is working.
As Reggie has been pointing out, Europe's weak-link countries have bet their national credit ratings on an implausibly quick rebound that just isn't materializing for them. The Germans are facing a grim choice between starting the bail-outs now, knowing that would only encourage more irresponsibility, or waiting till the sovereign crisis spreads and starts knocking down European private banks. The only relief is that the weakened Euro is taking some of the pressure off of exporters.
Meanwhile the US is feeling more and more sure of itself. It has by far the biggest, most liquid debt markets, the supposed safe haven to which everybody runs when fear spreads. It's hard to imagine how the rest of the world could reduce its dollar exposure, with so few other alternative stores of value, and all of them at least equally problematic.
But if you step back and take a hard look at how the US differs from Europe, what you see is a far more centralized system that is much quicker to bail out and prop up mal-investment. You see overall greater fiscal irresponsibility, worse competitiveness, and a political culture that seems to not even be aware that such a word as "austerity" exists (Ds: "increase spending!"; Rs: "cut taxes!"). I don't know when or how it's going to end, but I'm having trouble seeing how it could end well.
Is the US on the hook for a Greek (PIGS) bailout?
http://www.zerohedge.com/article/ron-paul-grills-bernanke-massive-expans...
My letter to state Senators of 4/15/2010. No response to date (typical):
Dear Senator YOUR SENATOR’S NAME HERE,
The International Monetary Fund (IMF) recently announced a TEN-FOLD expansion of the Fund’s borrowing arrangements via New Arrangements to Borrow (NAB). The NAB multilateral facility will – according to the following press release - expand from $50B currently to $550B, for an increase of $500B, or HALF A TRILLION DOLLARS.
http://www.imf.org/external/np/sec/pr/2010/pr10145.htm
Normally, I would not contact your office with the financial details of the IMF, however, the United States of America (USA) is a key participant in, and contributor to said fund, and will be responsible for a commensurate TEN-FOLD increase in its share of debt obligations, which is approximately 20%.
The USA is currently responsible for about $10B. Following the NAB change, the USA will now be responsible for about $105B. This is another USA taxpayer (read constituent) obligation which has increased massively during the (ongoing) global financial crisis. These monies will no doubt be used to address (read bailout) the still unresolved financial crisis unfolding in the Eurozone, with such notable debtor nations as Portugal, Italy, Greece, and Spain (PIGS) as likely recipients of bailout “loans”, again at USA taxpayer expense.
Senator YOUR SENATOR’S NAME HERE, please explain the process by which these TEN-FOLD debt obligation increases for the USA taxpayer became approved. I do not recall Congress voting on said IMF funding increases. According to the Constitution of the USA, any increases in borrowing (debt) are the responsibility of Congress:
Article 1, Section 8, Clause 2: “To borrow Money on the credit of the United States.”
Article 1, Section 9, Clause 7: “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.”
The USA is the largest contributor nation to the IMF, and just increased its obligations TEN-FOLD to $105B. Senator YOUR SENATOR’S NAME HERE, is the USA to bailout not only the private financial institutions of the USA, but now also must we bailout Europe? Was there a Congressional vote on this increase, as there should have been by law, or did Congress yet again abdicate its authority over financial, and budgetary matters to the Federal Reserve, and the Treasury? Do you have any idea what these agencies are doing with public money? Who is managing the finances of this country? Congress, or the bankers (including the Federal Reserve Bank)?
Senator YOUR SENATOR’S NAME HERE, I hope the fact that this letter to you is dated April 15th, 2010 will not go unnoticed. As you are well aware, today is the date that Americans are obligated to pay our taxes to our government. We pray that these funds will be used wisely, although I must say that as I look around I see the need to pray more earnestly.
To recap: The IMF has increased its “borrowing arrangement” TEN-FOLD. The USA’s obligations to the IMF commensurately increased TEN-FOLD as well. The USA taxpayer is “on the hook” for these obligations. It is my sincere hope that taxpayer monies will not be used to bailout the Eurozone. It is bad enough that taxpayer-funded bailouts occurred here at home. Americans are rapidly becoming serfs, vassals, and slaves in their own country owing to the enormous debt burden that is being forced upon us. We will not sit by idly and let this continue.
Sincerely yours,
John Q. Taxpayer
Not surprisingly, you haven't received any response because you stumped them when you mentioned "the Constitution". Their aides are on it trying to figure out what it is, and why it is in violation of their implicit right to plunge us into eternal debt.
Now,. that was FUNNY, I don't care who you are......(((;
The IMF, will just say, Get R' Dun!!..
Hey, the FAT TAX is next............
More probably because senators and congresspeople are all full aware that the US and others are not lining up resources to fund the IMF but money.
The IMF funding is not a supply of resources but a pledge of funding countries to consume an equivalency in goods, commodities to their loans.
One unexpected consequence of a strong USD (thanks Greece) is that Obama has the luxury of delaying cap and trade legislation in favor of immigration "reform". A lame duck Congress can only get so much done...
Meanwhile, at meetings in Brussels the topic is how they can get Americans to pay for this EU mess (after all, everything is GS's fault).
Great post Reggie! There are very few of us who have been saying for at least a year now that Greece will default. Stevie Wonder could see that! Hopefully Germany will save themselves and just drop this whole EU facade once and for all before it is too late. The U.S. has been lying about their numbers for years now which is why Shadowstats.com is in business. What makes people think the european countries are any different? Whenever the U.S. or european country come out with financial #'s just double them and then you'll be in the ballpark for the correct #'s.
It should be pointed out that the Republic of Ireland's 14.3% deficit figure is partly down to "once-off" expenditures for bailing out Anglo Irish Bank. Also, the public debt figure for 2009 was only 64%. But unlike Greece, we have a US-style crisis of private indebtedness along with our public-finance problem. And anyone who doesn't expect more downside "surprises" out of the Irish property/banking crisis hasn't been paying attention. Finally, that 64% debt figure from Eurostat still doesn't include the off-balance-sheet NAMA SPV.
And you would think it important for all these other agencies to get it right when talking about the health of sovereigns. Given that they can make a signinficant impact and can hand around billions $$. But they don't. Rediculous really. You would think they deliberately don't look too hard.
Greece is just about to run out of other people's money
the eurozone is a fine example how socialism really works sooooo well!!!hahahahahahaha
+1
Reggie you're consistently right, back up your arguments with specific data and details and refuse to believe that giving things new names will change unpleasant or intractable facts.
Therefore (I fear) you'll never make it as a financial or political journalist!
GS,
I am counting on a dollar rally. But when it comes I plan to move most assets out of US on back of the strength. Any ideas (other than Canada) where I should put funds?
Thanks!
Reggie,
You are my favorite Cassandra (that's a compliment) but that has to be a frustrating role. Hopefully, you are savvy enough to make money off your analysis. Although, in our La La Land markets, it is hard.
Thanks for the article, I look forward to them!
IMHO where to move funds is a decision better made *at that time* and not planned in advance. There are way too many things that can happen between now and then.
That having been said -- at this time I still like Singapore. But time will tell...
Agreed, but as of now, I would do Loonies, and AUD.
Both countries are resource powerhouses.....with LOTS of metals, and natural resouces.
In the last flight to safety the AUD got hammered real hard. Then as the world realised that China was not collapsing it rallied back almost as quick.
When the next melt down/flight to safety occurs look for the AUD to suffer the same meltdown but as soon as you see the situation in China as being stable, jump on the AUD asap.
Be aware of a chinese slowdown/bubble pop though although that could still be a year or so out. Aus not a bad place to be if TSHTF but dont rush in to the real estate market! NZ another choice if you're looking for a stable farming region far away from everyone. NZD roughly pegged to the AUD but cheaper.
by Popo
Singapore is a city-state of 4.5 million that has to import all of its food. As soon as currencies collapse and world trade starts to break down, I'm leaving America, the world's bread basket, and going right there.
I don't see how any other country is going to be much better. When global financial crisis turns to global social meltdown, I wouldn't want to be anywhere but the USA. It's a lot easier to blend here than in homogenized cultures. In singapore, you're a target, you white devil you, but you won't have a gun. The USA still has one leg up, and that is we have lots of guns to defend ourselves, and being alive is a precedent for subsistence.
As for food, don't worry about it. At first taste of severe breakdown, everyone will free fido and trigger. We have more recreational animals in this country than any other, and when TSHTF, we will have a lot of meat roaming the streets.
If you dive even a little bit down the anthropological rabbit hole, you'll soon discover that there is lots of meat roaming the streets of our cities. Of course, long pig is not exactly thrilling to some people.
But no, it can't get that bad here. This is America! Go back to sleep now.
P.S. I am not suggesting other locations will fare any better either.
Brilliant stuff.
Since mid 2009 I have been warning of an impending USD rally and it gets closer and closer ...
http://www.zerohedge.com/forum/latest-market-outlook-0
I think you have it dead on...........if the EURO collapses(as we know it will), the idiots will do the FLIGHT TO SAFETY (LOL) routine again,and grab dollars by the Billions.
When your ship has sunk, you grab onto anything you believe will save you, even if it's in worse shape than what caused your ship to go down.
IF the PM's are still pegged to the $, the prices for them will be either a super steal, or headed to the moon.
It is a central banker's debt binge drinking contest to see who can create the most "money" and race their currency to the bottom. PMs going up in all fiat.
Ya, you got that right. Then the dollar collapses completely, trapping the whole flight to safety in a burning building. Enter inflationary hell, chaos, and war. When this happens the train wreck finally jumps the tracks skidding off into the unknown.
Do you think I can take my family on one last trip to Italy before that happens? You know, like if you were on the Titanic you would want to order the expensive champagne before it hit the iceberg.
You sound like the guys in 2008 that try to hijack a bus to disney land once it snapped into their heads that they were smack dab in the middle of a lie tsunami.
You gotta remember you want to not sink, that expensive bottle of champagne was just a distraction to get your mind off not having a boat that sinks, over and over and over.