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Major Investment Bank: "Greece Is Going Down, Germany Drafting Law For Orderly Insolvencies"
Zero Hedge has long claimed that Greece will be forced to default, with the only question being how this will be structured by Europe in a way to not allow the evil speculators to make buck on this process. Today, Greece shot itslef in the foot a little after announcing its latest debt number, which makes any expectations of climbing out of its Keynesian hole even more laughable. As Market News reports, "Greece's general government debt rose to E310.3 billion in 1Q from E298.5 billion at the end of last year, according to data released Wednesday by the General Logistics Office of the Finance Ministry." That austerity sure is doing miracles already. But it doesn't matter: it appears that Germany has already made its mind to let Greece drown. As Neil Hume at Alphaville reports, "Big IB to clients: "they have it all planned: they are going to sink the ship (greece). Merkel is now drafting law for orderly insolvencies, but they don't want anyone to make money out of it, hence the ban."" If this is true, it 's curtains for Europe. Shorting the Euro at this point is like shorting Lehman: you may see savage short covering squeezes but the end result is well known.
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You may as well buy ETF shorting funds and make a load.
On a daily time frame my lips are salivating at the first overbought area in order to short this sucker again, Can't whait.
"OOOOOOPPPPPPPPAAAAAAAA REEAA" shit i just spilt my glass of OZZO.
HEY. Greece is a nice girl, she doesn't go down that easily.
Neither does ouzo.
I'll take a chilled glass of retsina with my feta and olives, barkeep!
Oh, boy ! You dont know ouzzo.
Try it chilled from the freezer
with white grapefruit juice from
the fridge. Oh boy...
The near term is quite difficult to predict...but the long-term is clear. The EURO cannot survive, lest the states of Europe dissolved their confederation and created a REAL centralized European state. Not gonna happen. The Euro is a fiat currency without the "benefit" of unfettered 'printing' capabilities. 1-3 years....bye bye Euro.
More like 1-3 Months, IMHO.
could be. no doubt.
Don't be sure it can't survive. This may be a ploy to push for a closer agreement between European countries....especially those who are financially sound (I know, I know, there aren't many)...
I wouldn't surprise me to see France, Germany, Netherlands, Belgium and a few others do something a little different.
France has been named already as a "black horse" in the overindebted camp. Somehow always off-radar - but ready to spring to the front when the race to the bottom gets underway.
Netherlands may be an even blacker horse ready to do the same!
So, not much left in the way of sound economies in the euro-rump. Lux and Finland only...?
Maybe you're right...but don't forget the "Shock Doctrine"...when the shit hits the fan, it serves as an impetus for changes that the "powers-that-be" couldn't get through previously.
I agree with that. The impetus also serves as an inflection point. Two of three futures for the euro single currency: if the PIIGS break off first - then it will shoot up, if the fiscally sound rump breaks off first - it will shoot down.
Either event is a severe shock for the world financial system.
The 3rd option is a steady monetization of eurozone sovereign debt, a seismic wealth transfer from the prudent to the imprudent, savers to spenders. Tolerable to Germany, ex-victim of hyperinflation? Probably not.
That actually makes sense: Germany is planning on letting Greece sink, and halted shorts to keep speculators out.
Of course, it introduces tremendous market distortions (nobody really understands the rules right now), but nobody understands the implications of a sovereign default within the EU either.
I've long assumed the Euro goes to zero and the EU breaks up, I just didn't think it would be this fast.
Gotta hand it to the decisive Germans, though. Unlike every political wimp in every other country, Germany is moving full-speed towards inevitability.
There is a German saying that translates like this:
Better have an horrible end then have endless horror.
Another German saying goes, "spate, aber doch", roughly meaning late but at least it happened. The Iron Frau strikes again!
or us americans would say,
'it ain't over till the fat lady sings'.
bon voyage, sarkozy.
to the moon baby, to the moon...
Sure, and they got another famous saying: "arbeit macht frei".
In a whole different context that is exactly what the Greeks need to do.
"nobody understands the rules??" Let me spell it out:
1. You can't short something you don't own or have access to
2. You can't insure something you don't own and then try to torch it.
3. You can no longer make a million dollars on transaction fees a day trading eight shares back and forth between your desk and that of your frat brother.
It may not prevent an inevitable crash, but this is something that should have been done worldwide a long time ago.
plus gazillion
Thanks. Well put.
I agree this should have been done long ago.
Perhaps I should have phrased it, "nobody understands the implications" (although technically, I think "nobody understands the rules" is still acceptable).
Specifically, what does this mean for the CDS market and hedging EU sovereign bonds? Further, "you can't short something ... you don't have access to" is non-specific (you can drive a truck through that loophole). Shorting restrictions is cover for wider market manipulation, and I'm specifically interested in the form of that market manipulation.
We agree naked shorting is bad, should never be allowed, and at face value, banning it is a good idea. However, this is an area most definately where "the Devil is in the details".
If the number of shares short+number of shares long is ever greater than the available float of shares, someone is shorting naked. When that happens, an investigation needs to take place and the offending trader, broker, and counterparty need to be fined heavily, if not jailed. This kind of fraudulent behavior doesn't just impact bankrupt soveriegns, but healthy countries and companies as well. It needs to be stopped.
We agree on the definition. However, naked shorting is illegal in the US and by your definition it's done quite frequently (every day) with no investigations, fines, or jail.
It's illegal all the time, but periodically the SEC announces they are going to start enforcing the rule, generating much furor and turmoil. Then a while later things settle down and they sound the all clear, business as usual. I would like to see state police install electric signs along highways that read "speed limits enforced today" when turned on. It's confusing to not know when laws should be obeyed.
If the number of shares short+number of shares long is ever greater than the available float of shares, someone is shorting naked.
I don't think it works that way. Shorting can be recursive. A lends to B who shorts to C who lends to D who shorts to E .... At this point, A, C and E all think they own the same share of stock. A and C might or might not know that it's been lent out.
The number of shares owned - number shorted might be the same as the float. But the sum sure won't be.
If the number of shares short+number of shares long is ever greater than the available float of shares, someone is shorting naked.
I don't think it works that way. Shorting can be recursive. A lends to B who shorts to C who lends to D who shorts to E .... At this point, A, C and E all think they own the same share of stock. A and C might or might not know that it's been lent out.
The number of shares owned - number shorted might be the same as the float. But the sum sure won't be.
Totally agee. The money "extractors" (as Dylan Ratigan refers to them) can go be plumbers...I've got something clogging my toilet that needs extracting.
They should know all about crocks of sh*t :-)
Those are the logical rules, or the rules as they should be. But those are not the rules...unfortunately!
Amen.
*sings* "Why can't we be friends? Why can't we be friends?"
I'm lost, I see this as being bullish for the Euro. This is fiscally responsible, no?
I see it as bullish for Germany in the long run. If they were to really clean house and could show it through transparency... particularly if everyone else looks like crooks relative to them, all the money will flow to Germany.
First though, the pain.
Transparency - it used to mean clear. Politicians now use the word in double-speak. Transparency is any but transparent.
I totally agree with this view. Great comment, McCreant.
In the short run, the trading curbs and initial write-offs of Greek debts will be painful, especially for those Euro banks and pension funds that invested in the sovereigns and Greek corporates.
But I think the rest of the world will look at Germany as a sea responsibility in a terribly irresponsible world-- and eventually treat it as such. That might be under the Deutchmark, or under the Euro... who really knows at this point?
It will be interesting to see the degree that French and German banks investing in this toxic debt will take their "haircuts". I gather most German banks can absorb the pain... the French banks on the other hand... not so much.
Of course, we are still jumping the gun on this...
Does the McCreant clan have its own tartan?
You bet!
http://www.thefashionpolice.net/images/2008/02/14/tartan.jpg
Aye, very funny laddies! Make fun of me lack of spelling skilz, why dontcha? :)
You know I adore you asset man. :-)
This would be bullish for the Euro if the system were viable. Unfortunately, the system is not viable, and this merely exposes the fundamental nature of the problem (everyone is insolvent, and won't be able to cover their liabilities).
The EU sovereigns are unsustainable (bad demographics, capital mis-allocation, tremendous fraud and waste). The rest of the world has that problem too. The fact that the EU might be forced to see this "sooner" merely means they will default sooner. They cannot grow out of their current debt load.
Germany will benefit from this, but the EU will not. So, this is bullish for Germany because they will be the first one out of the room before the ceiling falls.
mikla,
agreed but not everyone!
everyone but germans and northern eu
i.e .lux, dutch, finland etc.
It is responsible, and good, it's just that it is being implemented in about the worst way possible, very suddenly. This has caused/may cause unnecessary, or unnecessarily severe market dislocation.
But it is far better than doing nothing, which is more than can be said for 99/99% of government interventions.
It will be better for long term physical gold investors if the 'hot money' is burned badly and exits in a fit of petulance, impacting commodities as well as everything else...besides, the powers that be will no doubt be trying to make sure that gold doesn't win out here in a major market dislocation--they need their own sovereign junk bonds to be the 'safe haven'. This along with general fear and panic may set up a good buying opp for gold--probably one of the last.
We are seeing the beginning of intra-elite financial warfare, or to be precise, some of the slower players are trying to fight back against the Asshole Empire that's been drinking milkshakes for lo these many years. And being so darn smug about it.
Start/keep piling your snowballs inside your fort; watch and wait.
Greece needs no sinking, she sinks all by herself the moment North Europeans stop holding her head above the water. No mea culpa there, the sooner the bitch drowns, the better.
Pure and utter rubbish. You should all read Barry Eichengreen's piece, Europe's Historic Gamble. I quote:
"Europe’s fortnight mirabilis was also marked by amazing – and erroneous – predictions. Greece would be booted out of the monetary union. The eurozone would be divided into a Northern European union and a Southern European union. Or the euro – and even the European Union – would disintegrate as Germany turned its back on the project.
But, rather than folding their cards, European leaders doubled down. They understand that their gamble will be immensely costly if it proves wrong. They understand that their political careers now ride on their massive bet. But they also understand that they already have too many chips in the pot to fold.
Those forecasting the demise of the euro were wrong because they misunderstood the politics. The euro is the symbol of the European project. Jacques Delors, one of its architects, once called the single currency “the jewel in Europe’s crown.” Abandoning it would be tantamount to declaring the entire European integration project a failure.
It is true that Germans are incensed about bailing out Greece. It is true that Angela Merkel is the first postwar German chancellor not to have lived through World War II. But her views and actions are shaped by the society in which she lives, which in turn is shaped by that history. And what is true of Merkel is still true of Europe. This is why European leaders swallowed hard and took their unprecedented steps."
Leo, that's all great as long as there are debt restructurings. The markets have to function in order to...shall we say...function.
If the banks and elites (and yes the pension funds) get whacked like they should, then no problem. I am pretty sure that Germany views it this way. And hey, for the sake of EUROPE the banks and pension funds will gladly give up a significant share of their stakes.
Unless all that is nonsense....there are bond haircuts or it (EUROPE) is over. Which is it? Does France really care? How much? We are about to find out; all this market stuff is just a distraction while France and Germany mull the haircuts and whether they are still married.
You can't just wish bad debt away, not by asking European publics to suffer for the bailing out of the rich. That is not the path to a strong political union, now is it?
What do you mean? It seems to me that necessity has often been the path to a strong political union.
awesome; fully agree.
+1000000000000000
Greece will go down (not just yet, they still got 110 billion euros to go). Before that Sarkozy, Merkel & co. will ensure everybody's got their leg chained to the financial fate of Greece, Portugal etc.
Europe's got the worst generation of political leaders since I don't know when. The current leaders have abandoned their own countymen, and chosen instead to worship the false idol of multinational EUSSR. There are only very few sane leaders left, the Czech president Vaclav Klaus comes to mind first.
The EURO may be the 'jewel in the crown' of
the continent, but the continent of Europe has
no operational capability to 'create' Euros as
needed. The ECB has its hands tied by the FED, by
its own confederated status, and by the infighting
and insolvency of its member states.
Politics is illusion. Economics are reality. The economics of the Euro don't work. Maybe those forecasting the end of the Euro last week were wrong, but that's an issue of timing, not of the reality of the situation. Europeans have been trying to assert the primacy of politics over economics and reality for almost two centuries. They just don't get it. If politics trumped all, the Roman Empire would still be going strong.
Considering that all currencies have failed so far (including gold linked currencies), announcing the demise of a currency looks like a sound bet.
Not to argue over the dissociation between politics and economics, but what was the political project of the roman empire toward its end? They did not look as having one. Still had an economy though.
Yes, "look upon my works, ye mighty, and despair" indeed.
Well, the Emperors still wanted the rest of the Empire's subjects to view Rome as the center of the political world. As you state, the underlying economics made that unnecessary. Those who wished it to be true had all of the organs (such as they were in the day) of state propaganda on their side, yet couldn't hold it together. People play along with political games until the cost of doing so is too high. Then they stop playing and focus on what is real. For the Roman Empire, one could also substitue the Soviet Union, which was also a place where politics supposedly supplanted economics. It's simply not possible.
Go back to Aristotle and even he knew that "oikonomikos", i.e. the management of a household, preceded "politikos", the managment of an aggregation of households pursuing common goals. It's pretty basic anthropology.
"Considering that all currencies have failed so far (including gold linked currencies)"
Err... The ones that failed are the ones that failed to stay backed by gold. Which would be all of them.
One thing not being brought up here is that the Euro is the only currency with any PM backing at all (15% by gold).
Leo, what is your point? Is it that Europe took a huge gamble, or is it that the gamble is sure to work? There is no question they took a huge gamble, but there is huge uncertainty as to if it will succeed.
There is one little problem in this whole equation, and it is how people will react to austerity and how they will react to being legislated by the ECB. I say it doesn't work, and will fail spectacularly.
Merkel's recent actions are just the tip of the iceberg. Who is she attempting to placate? The German parliament and the German people. It may be too late for her.
good points...tough to know exactly what insiders plan but they often get their way.
By the way, why are German considered so saintly and brilliant in all these ZH comments, they can be arrogant just like Wall Street, and German banks did East Europe like Wall Street did subprime housing lending - predatory, short term oriented, with the long term taken care of by tax payers. I think Germans have had more power than other countries adn have been able to take advantage of others with it, just as US has had, but it does not mean they are better.
Someone tell me what I'm missing.
A high rate of US citizens descending from Germans?
"symbol of the European project", "jewel in Europe's crown"
Yes, like the Concorde.
NOT.GONNA.HAPPEN.
I will eat Neil Humes shoes if this happens.
Just thins morning Merkl was on the offensive regarding EUR. This happening only beacue this year EUR bond redemptions are north of 2 trillion EUR, mostly borrowed when EUR was 1.4xx-1.5xxx .... Its lowering of costs .... nothing else ...
If euro goes to parity with dollar, the only sound we will hear is the clinging of champagne glasses in Europe.
It makes me chuckle every time somebody talks about 'shorting' EUR/USD or some other cross. Perhaps currency graphs should be posted around a vertical axle, to make it more obvious what it is about.
The big sell in stock indexes was probably european players reducing leverage and taking profits after they skyrocketed in euro terms, but chicken littles are quick to see the world ending.
Now is the time to sell gold into european feeding frenzy and buy US equity.
Hunch Trader,
I give your post a real five star! 100^100! You are 100% correct!
Leo, only someone who does not know value will sell gold in return for paper. Especially now.
Or someone who wants a lower gold value. if i am wrong, i am sure to hear about it.
I disagree. I think you are early with this strategy. The Dow/Gold ratio is not low enough yet.
It will likely go below parity this cycle. But short term this could be a good trade.
Get this done live, in 3d, and you just might have a really awesome graphic overview. You would have to magnify it more and more as parity arrived between the currencies because it would be harder and harder to detect movement.
As much as I'd hate to see it happen,
I'd hold you to your word if it does...
;-)
I was going to ask how he would like them prepared...
Like Lightening it will strike. More "perfect storms" a'coming.
If this is the plan, and it is being considered just 9 days after 750 billion EUR was infused; why the fuck go with all the hassle. They could have easily put a ban on naked shorts and not infuse the money and let Greece collapse. This makes no sense.
CB,
Exactly..WHY THE FUCK RISK YOUR CREDIBILITY?!? This makes no sense whatsoever.
Credibility was lost on the bailout. Now German politicians realize they have lost credibilty with markets and voters. What good is being the biggest checkbook in Europe if your own people would rather have krugerrands?
I concur, man...100%
This price action makes no fucking sense anywhere.
We've got vol off the chains, the markets plunging, gold now plunging too, major price dislocations in oil.
Why the fuck put the trillion in and do the FX swap thing only to let it all come apart?
I am waiting here for the inevitable Fed sticksave and it's taking everything I can muster not to pull the "short" trigger on heavy industrials like CAT. What the charts are telling me, in copper, oil, coal MLPs, and a lot of other shit, is that 1) we are seeing massive carry trade unwind=short the hell out of BRICs, 2) real yields are rising except in core treasuries, 3) short most everything else too.
Are the charts really auguring austerity? We're really going to try to pay the banks and crooks at the top who own the gov't bonds their money back in real production plus interest?
yes, we are that stupid
+1.
Zero sense, whatsoever.
Not that I buy into this either, but to play devil's advocate I would point out the EUR750b has not been infused, but merely promised (sort of). Also, the EUR8.5b spent today on the Greek soveriegn redemption is a small price to pay for more time.
(This also fits in with Weber's line that if parliment doesn't act by 5/21, 5/24 will be dramatic.)
CDS are insignificant in all of this. IF Greece goes down; banks close shop. It is that simple. Libor goes above 1000 bips and the world is fucked. No way in hell will that happen. Credit event doesn't mean anything, especially now; but the consequences on inter-bank lending will be catastrophic. I dont know if you can imagine what will happen if Greece goes down or not; but I can promise you, it will be unlike anything you have seen in your life. But if Greece goes down the only two lending mechanisms left standing will be OIS [and thats not much, since its 1 day borrowing only] and ECB swap line [which also doesn't matter if LIBOR explodes since the cost of borrowing is LIBOR based]. Imagine Northern Rock x billion.
is there some middle ground...like buzz haircut..not bald, but military flat top?
No, there is not.
Example; today AMBAC announced a credit event on June 2nd and no one noticed and no one cares. Now; sovereign debt should be more risk-free than any private debt [purely theoretical; but for pricing reasons and for arguments sake lets follow this line] and the market operates on that assumption. Maybe Exxon going bust or JPM or MSFT would measure in the impact force on the inter-bank lending as does a sovereign credit event. This can not be observed from game-theory POV; this is a 0 sum game. Greece defaults -----> basically, the world is closed; no new credit, no new CCs no nothing; over, done, goodbye. Greece does not default -----> everything normal. This really isn't Argentina or Ecuador or Peru defaulting on their debt [which they do every two years or so], it is a country which is a member of the second largest monetary union in the world, second largest political space of influence; this is not Bolivia going bust; its an EMU, EU member. In my book this would trigger historical consequences both on economic and political scene. LEH would be a baby in comparison to this; a silent whisper compared to the sound of the debt Tsar Bomb, and 750B would be like throwing a glass of water on Manhattan on fire.
thanks much, makes a little more sense now...so, does this mean Greece is actually in a position to hold whole world hostage?...and if Greece does not default, what of Spain, Italy etc..
"Okay, so the scariest environment imaginable. Thanks. That's all you gotta say, scariest environment imaginable."
I never thought I would quote that movie, but it seemed appropriate here.
CB,
In all this ZH cacophony, THANK GOD you're providing some level headed reasoning and why this WILL NEVER HAPPEN! The collateral damage is just too high. Thanks again!
No problem man.
"In the land of the blind, the one eyed man is the king"
Again, I don't think it will hapen, but you ignored the two facts I put out: A.) the 750b has not been approved; b.) Weber says if parliment doesn't act by Friday, we get drama on Monday.
As for "if Greece goes down or not; but I can promise you, it will be unlike anything you have seen in your life" I think you have been spending too much time on ZH. Greece has EUR300b in debt. Let's say 1/3 is held by the banks or 100b. What are the total assets of the European banking system? 35 or 40 trillion EUR, so the loss would be 25-29 bp, hardly catastrophic. In terms of equity it's a little more dramatic, and some smaller banks might be wiped out, but TEOTWAWKI as you describe (assuming no major contagion).
The lending market won't shut down - haircuts and collateral requirement will just go up (no one has been accepting Greek shit for months now anyway).
The worst credit event was the Latin American crisis, when all the NY money center bank were insolvent. None went under.
Again, I don't think it will hapen, but you ignored the two facts I put out: A.) the 750b has not been approved; b.) Weber says if parliment doesn't act by Friday, we get drama on Monday.
As for "if Greece goes down or not; but I can promise you, it will be unlike anything you have seen in your life" I think you have been spending too much time on ZH. Greece has EUR300b in debt. Let's say 1/3 is held by the banks or 100b. What are the total assets of the European banking system? 35 or 40 trillion EUR, so the loss would be 25-29 bp, hardly catastrophic. In terms of equity it's a little more dramatic, and some smaller banks might be wiped out, but not TEOTWAWKI as you describe (assuming no major contagion).
The lending market won't shut down - haircuts and collateral requirement will just go up (no one has been accepting Greek shit for months now anyway).
The worst credit event was the Latin American crisis, when all the NY money center bank were insolvent. None went under.
no.
EUR bonds will not be excepted as collateral or any other EUR denominated asset. Basically, nothing will suffice to calm London fast enough to stop contagion.
Think again, Cheeky.
Who is more "all in" than anyone else in this global finanical crisis?
You don't think the Federal Reserve will step in to provide the necessary liquidity to keep those credit markets going-- if we even get THAT far?
If all else fails, the Fed would accept would accept EUR bonds as collateral in a second-- if it meant that doing so would prevent a deflationary tsunami. Even if it meant doubling the size of its balance sheet.
Shit; you are right; its Maiden Lane - EU edition ....
FUCK!!!!!
And if they use mark-to-model to assess collateral value [Italy suspended mark-to-market for all EU bonds held in Italian banks], if EUR is proped up by swap facility etc etc, FED could easily give a buck on 10 cents posted as collateral. Goddamn.
Thank you America. Its a fucking steal of the century.
I just knew you'd eventually come around to the Dark Side, Cheeky! ;)
Deal of the century, though? We all know that Agency MBS was the steal of the century!
Ahhhh
The dark side is quite smart and lures me with lowered [non-existent] collateral requirements and free ZIRP fuck you money i can play with in the derivatives market. Ben, or one of the staffers, if you are reading this, holla me at cheeky_bastardzh@hushmail.com, i may have a few ideas what to do with excess bank reserves.
...you would have a hushmail account.
Reminds me of 'scene' days.
"This makes no sense." But how would you go about making French and German holders of Greek debt whole without the infusion? Ban on EUR-denominated CDS trading may be a stab at the Anglo-banking complex... doesn't mean Merkel & co. don't know which side their bread's buttered on.
read comment above
Cheeky, how do we know the money was infused? I think it was just talked about, everyone agreed on the general idea, and then in working out the details, it fell apart. Yeah the fed did currency swaps, but that was not part of the trillion they talked about. Did any of that proposed trillion arrive anywhere????
They had to show some 'unity' to start with -E750 billion is one helluva price, but it was only other people's money (as ever).
European union and the single currency.
Imagined by desk clerks, and implimented by little men. If Sarkozy can keep standing on his tip-toes and puff his chest out without everyone else falling about laughing, he might be able to keep a northern Euro-zone and save France's face; but to do that you have to have full fiscal unity. You would think the people would like to have a say in that, but since Maastricht, Lisbon Treaty and then 'it-isn't-a-constitution, but if u have to vote Ireland, keep voting until you get the right answer', the Eurocrats don't believe in the proles having a vote.
I just wonder if they tried that, what BBC, Sky, ARD/RTL/ZDF, Poker Channel official stance would be.
I hope Germany goes for full Armageddon, crank up the Wagner. We need a wholesale shake-out!I suspect even now, however, the gnomes are trying to re-write the wording to make it seem less explosive and provocative.
It's simple Greek dichotomy. Either
1. The EU is finished, or
2. Merkel is giving birth to the spawn of Satan.
Entertaining however you slice it. Thanks Tyler
ve have vays of makink you go insolvent in an orderly manner
These are politicians. Their only useful skill is getting re-elected.
They have no clue. There is no plan.
Still begs the question. Why doesnt Greece just default and nationalize? If they are going to get kicked out of the euro and forced into an orderley default then why do it on the EUs terms. It makes more sense for Greece to default on her terms.
yes, that's what I think also...ask Argentina...its painful but beats 30 years under IMF austerity.
Greece wouldn't be able to defecit spend anymore because they won't get any credit/debt from anyone but that beats having to stop deficit spending and having to pay banks back with interest. Just ask anybody that has filed personal bankruptcy...ruins your ability to get cheap credit but better than being debt slave rest of life.
The Greeks aren't done spending other people's money. It's that easy.
And 90-day LIBOR is approaching 50bps. Hmmm.
You should rename the site "Euro Hedge" for a week.
All of this shit over a fucking INSIGNIFICANT nation like Greece?
Fucking EXPEL THEM.
GFD Euro idiots, they only brought these effing shithole nonproducer nations in IN ORDER to rack up debt and consume the exports of the core nations. Just like Britain made Ireland and Iceland into ponzis, this is the fuckin South Seas Bubble all over again.
You're an insignificant and ignorant jackass!
Isn't that like the pot calling the kettle black?
So if Greece goes down the tubes, and, is kicked out of the EMU, doesn't this make the Euro stronger? Going from PIIGS to PIIS? I guess there's the damage from owning Greek debt, but they can bail out the banks (hence the TARP era ban on short selling the banks).
Not only that, Germany looks stronger. It's a win/win for them, and they finally figured it out. They probably hope their people will stop dumping euros for kruggerands if they stop the bleeding.
I do not see any method to this madness, but rather, just a bunch of befuddled folks haphazardly tossing up a few trial balloons to see what the reaction is. This is an unprecendented situation and something for which I doubt any leader now in power gave any previous thought. If anything, I suspect each country is trying to assess the collateral damage if they let Greece go down, perhaps thinking the money saved in not bailing out Greece can be used more directly bailing out their own banks without the slippage associated with a middleman who has a penchant for taking large cuts. The generation now in power is not the father of the euro, so I think in the end national salvation will come before loyalty to something they did not create. They may choose to save Greece and maintain the now proven to be unworkable euro, but I'd still tend to lean toward dissolution, especially when the next member comes hat in hand.
Spot on. The three worst words in aviation, "hey, watch this!" are apparently being used without restraint in government halls everywhere as countries try to determine what's best for their individual situations. Any vet unfortunate enough to have tasted war will tell you that even the most detailed of battle plans goes right out the window in the first ten minutes of a conflict. Just too many variables, too many "unknown unknowns (I hate Don Rumsfeld, so it pains me to use that, but it's apropos nonetheless).
Most folks here on ZH are reasonably well-educated, and VERY eager to learn about the pitfalls of modern "finance," yet even we can't come up with a sizable consensus on what's best to do from one day to the next. Can you even imagine the scenes being played out right now in the halls of political power??
Perhaps we should all start prepping competing screenplays for the Wachowski version of events...
Off topic, but I get the impression that you have a turbine rating, and spend a lot of time in the flight levels. Yes?
Your impression is correct, good sir, though I've not been spending enough time in the flight levels of late. If you know of any uber-wealthy cabal participants who want a secretly-subversive pilot to operate an aircraft whilst trying to bring them down from the inside (wink, wink, Bob's your uncle), do let me know!
Also OT, but I enjoy the dark side of your humor. It pairs well with your writing style, too. I always look out for your posts! Perhaps it's something about living in this part of the world that does it...
Leo, it's clear by now, it was never about bailing out Greece. You can see it from that debt chart that was posted here a while back. Also from the Spiegel interview with Former Bundesbank head Karl Otto Pöhl. Just follow the money:
Just as TARP was not about saving US economy....giving money to banks that they simply used to perserve their reserves or speculate with did nothing for US economy short of postponing some dislocation pain and saving bank bond and stock holders
It was Sarkozy who was banging the table.
A major "tell" as to where the serious problems lie.
The EUR750bn has proved to be 95+% jawboning, allowed Greece to roll its May redemptions. They thought this package would calm the markets - and rely on the IMF to put up any more real money.
It cost Merkel's majority in the upper house and all but scuppered her pet health legislation (where have we heard that one before?)
The situation is spiralling out of control, not helped by Sarkozy fist-thumping the meeting table and a failed Spanish auction. I'm opening a beer and laying in the popcorn for this denoument.
WTF ?!?!?! anyone really listening to Goldman Sachs calls? (the Big IB is them)
Are you serious? Man, it's the guys that screwed 7 out of 9 of their Big Ideas To Rape Customers in 2010 (tm).... get real!
I'm with Cheeky and Leo on this, the credit event of a Greek default would essentially end modern finance as we know it. Yes, it is a small country, but the domino effect would fuck things on such a collosal scale that monkeys would probably surpass us in quality of life. Yes this is hyperbolic, but only kinda.
As far as a more realistic scenario, I'm expecting some bondholder haircuts, with those haircuts being the reason behind the "ban"/notification of enforcement of naked shorting.
Good, let's end modern finance as we know it. It is modern finance that is destroying us.
Neither you, cheeky or leo provide any evidence to back this opinion. Why are we to believe such a doomsday scenario?
I do not understand why so many make these assumptions:
1. Greek default = end of EUR/Eurozone?
2. Greek default = frozen IB lending?
For #1, I just have not seen a reasonable line of argumentation. "It's gonna be very-very bad" is not good enough.
EUR is issued by ECB. Greek bonds are issued by the Greek government. To have faith in EUR, I need to have faith in ECB.
If Venezula and Angola have issued $-denominated debt, and Venezuela or Angola default, will I lose faith in $?
For #2, yes of course banks like BNP, SG and Postbank will suffer. However, it seems much more sensible to recapitalize these banks than just throw a huge heap of money at the problem hoping that at least some will stick.
The fact is that Greece's GDP measured via PPP is half its nominal value. Which means that unlike Portugal or Spain they will NEVER pay back their debts.
Better default now than default later and compromise the ECB in process.
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