What If Greece Says No?

Tyler Durden's picture

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The Aviator's picture

if greece says no, 2008 looks like a picnic. Better already be all in physical gold and silver

financeguru500's picture


Greece has nothing to do with the U.S. It will be just like Iceland all over again. Pretty much silence.


** if your going to junk me, how about posting a rebuttle instead of just being a dbag.

CompassionateFascist's picture

Rebuttle: US banks exposed via Credit Default Swaps. Plus: psychology of contagion, which is non-rational but extremely real.

financeguru500's picture

Good point, I didn't know about the CDS. What kind of exposure does the U.S. have to greek debt?

bgilliam83's picture

some guru, you don't even understand CDS.  Your mother should have swallowed.

financeguru500's picture

wow, I take it your one of the douchebags that junked me. Go fuck yourself. I understand how CDS work but I did not know that there was a significant exposure to the Greek debt. Even so, I will be the one who comes out of this being proven correct when nothing happens. You guys are running around like chicken little thinking shits going to hit the fan if greece doesn't accept a bailout.

Fact is, if the E.U., China and the U.S. are working to make sure that nothing bad comes from this then there won't be any issues. The banks who are exposed to the debt will be bailed out and that will be the end of it.

dcb's picture

there was an article in the nytimes on this this past week. nobody knows the amount, who has writtten what, and who has what exposure and what is hedged. it looks like they are starting to collect the data. The main problem is that it is a can of worms, and totally unknown. for me what the issue is about is that if there is a dafualt and shot hits the fan everyone knows the central banking emperor has no clothes. WTF have they been doing the past two years after lehman in closing down and limiting these derivative markets. the potential for this shows they have done nothing!!

Thomas's picture

Am I the only one who feels like Bill Murray in Groundhog Day?

Orly's picture

Speaking of conspiracy theories...

Okay, Groundhog Day was a great movie- quite original- but had nothing to do with conspiracies...

But does anyone else find this tidbit interesting?


Seems one of David Cameron's boys offed himself in a Port-a-Potty.

It's getting thick...

falak pema's picture

Its always gets thick in a toilet, especially a portable one. Imagine trying to party when the port gets imported from the window and exported down the flush. Some festival!

Michael's picture

Greece will take all the euro currency they will give them with no intention of ever paying that money back just like before.

Greece will say everything they need to on paper and get another $100b.

Just a bunch of words in exchange for all that money.

I'd do the same thing if I were Greece and go on a spending spree charging everything on the euro credit card too.

Of course I'd have no intention of ever paying that money back just like I have no intention of ever paying back the US national debt. 

falak pema's picture

Now Greece is up for hock. It was part of the Turkish Empire for four hundred years. Since the end of the second world war the greeks have proved they are incapable of being efficient anywhere else than in a NJ sandwich fast food bar. So back they go into the German empire and will now be co-managed by China and ECB.

Southern Europe will soon be lumpenproletariat land; the coming new social order imposed by Oligarchy to make EUrope competitive with Asia as it rises, and this...in fifty years time...long way to go, long time coming. Fasten seat belts piggies in your wallowing mud reservations. You be the European Apaches of the coming new age...like in the USA...At least the Mediterranean has the sun, the sea and the olive oil...

tonyw's picture

It's not just the banksters the Greek people and government are also to blame. Read this article about  The Big Fat Greek Gravy Train: A special investigation into the EU-funded culture of greed, tax evasion and scandalous waste

Read more: http://www.dailymail.co.uk/news/article-2007949/The-Big-Fat-Greek-Gravy-...

MadeOfQuarks's picture


I predict they will agree to the package, then fail to live up to the austerity. Greeks are quite good at pretending to follow the rules.

Cole Younger's picture

I thought I read here (ZH) a article that suggested U.S. banks have 126 billion dollar exposure. Spain and France owned the Greek bonds..U.S. banks hold the swaps on those bonds.

PY-129-20's picture

Before 2008 I would've said a billion is a lot of money. But since 2009...

Ahmeexnal's picture

Did DSK stop when the maid said "NO"?

wisefool's picture

We probably could abort the baby if one got lodged in her throat.


- From a man who about to die and my name is Bill.

Manthong's picture

$126B doesn't even come close.

Your money market accounts are 40% into HY Eurozone Bank debt.

And all of that insured, re-insured, hedged, chopped, chromed and toasted through swaps.

God only knows how deep the rabbit hole goes.

Sleep well.

Got silver?

mogul rider's picture

You are missing the best one. Your lovely Money Market fund.

Yup, through internediaries your MMF holds up 60% of Greece, Portugese, and Italian toilet paper.

You would be wise to go to cash during this upheaval as below a buck will the new mantra in the fall.

Even Ben Davies at King World mentions it. Do your research - your ass depends on it. And most importantly, get your head out of your ass.


Al Gorerhythm's picture

Fact is, if the E.U., China and the U.S. are working to make sure that nothing bad comes from this then there won't be any issues. The banks who are exposed to the debt will be bailed out and that will be the end of it.

Oh yes! They have such a great track record in keeping a lid on things and making the world safe and cosy! Look how they have managed the world so far! They get my vote for manager of the month award.  LOL. ( Now look what you've made me go and do. I never thought I'd type or utter LOL and now I've done it twice.)

lilika's picture

US Insurance companies insured the CDS. They're on the hook. To hell with them.

jonii's picture

financeguru500: Oh C'mon now. You still have a lot to learn about finance if you can not figure out what would happen if Greece defaults, esp after Lehman. Did you not read the article? Did you miss the Lehman crisis? It's not really about Greece. It's about if Greece sets a precedent and defaults, then bond markets will surely start dropping other PIGGS' sovereign debt and the contagion would spread. You cannot be that nieve to assume that Greece will default and everything will be ok b/c they don't have much direct exposure to other countries and their banks... another happy day eh? You don't think yields would spike on the PIIGS that are at risk of maybe following Greece's lead and defaulting on their own liabilities? Not to mention this time it would include Spain & Italy b/c fear would spread further. It would definitely relinquish a lot of the pain imposed on the indigenous people in those countries from austerity. Do you see the panic in world markets that already happens when there is any uncertainty surrounding Greece? A flight to safety where all risk asset classes drop and interbank lending dries up (although not to the degree of Lehman... not yet is my point). Would that not cause a run on the banks throughout Europe b/c of their overall exposure to the PIGGS? European banks have 2 trillion total in PIGS' (not including Italy) sovereign debt on their books, that includes private debt. No fear as these countries suffer from recession and aren't able to honor their obligations, both public and private debt? US MM funds are also invested in European banks' debt chasing higher yields so there is more exposure than you think. Is it really a mystery why many of the banks all over Europe are seeing their credit ratings downgraded. Have you not read why? How solvent do you think these banks will be once they write down the losses on their books? Wouldn't liquidity dry up again in the markets and investors liquidate and pull their funds from other banks not knowing which banks have the most exposure to the insolvent periphery countries which would make those banks' capital ratios plummet and render them insolvent. Not to mention the panic that would result if the ECB had to vote on accepting a bailout or printing more money to offset the losses from their exposure to Greek debt. They do not have enough capital currently to deal with such a loss. C'mon use your head. This isn't a walk in the park.

Raymond_K_Hessel's picture


Also, ECB has 30-50B of exposure to Greece and only 10B in assets...

Popo's picture

All true.  But rates will spike either way.   When it becomes clear that currency devaluation is the preferred course of action,  demand for higher yields will rise to compensate for forward losses from devalued currency.

One way or another,  in response to a default,  or in response to inflation -- rates *will* rise.   Not because of policy preferences,  but because of market demands.

And that is the brick wall we are speeding towards.

Reptil's picture

No, it isn't. I'm not a guru, but I'll try to explain why IMO a default is the only way forward for a europe that wants to be free:

The banks in europe had 2 rounds of "stress tests" to gauge the risk of "contagion" and to prevent a liquidity problem. They said everything was alright, and solving the problems at the root of the 2008 and 2010 crises was not on the agenda anymore. It wasn't even a topic of discussion at several elections held in the recent past.
Right now the message, presented in the MSM (main stream media), is that there are "unresponsible, emotional" elements in society that are calling for stopping "help" for Greece, and that there are "responsible, concerned" financial experts (Juncker, Wellink, etc.) that say we must do this, or else the whole system will fall flat on it's back.

A couple of very simple points:

1. The PIIGS are technically insolvent, just like the rest of the financial world, with a few exceptions. A further bailout is not a "solution" to the underlying problem, it's "buying some time" to get it all sorted. Austerity, presented as a means to cut budget deficit, will have the effect of stiffling the economy, and throw away any chance of economic prospetity of all countries in question.

2. The bailout will be carried by the backstop; the taxpayers, and their children. These have nothing to do with the cause of the credit crisis (as it's still called here), but are seriously at risk since assets of investment, savings and communal banks have been put in the same bucket. Austerity means that public assets will change ownership, since governments value a "stable" financial system more than protecting the people themselves, which was their primairy function, as State.

3. The cause of the Souverign Debt crisis has often been called "cultural", and the differences between the northern and southern and eastern countries put in the spotlight. However, it's the EU (European Commission, European Parliament, all the different organs and their functions) who have been negligent of their appointed task: Keep a tidy Europe while the internal financial and economical connections flow, adjust and reset organically. THAT was the whole point of the euro currency. To create such a fertile ground. They failed miserably and fail right now. They are corrupt, and strike out against those that lay bare that fact. Their interests lie with the larger corporations, that are forming cartels, like Monsanto (against the wishes of almost ALL europeans), their modus operandi is to take money, hide it, then spend leisurely on bribing other politicians in the seperate countries. The call for more money, and power to come up with a "political solution to bridge the cultural gap between souverign states" comes from them.

4. Senior Bondholders of banks are the owners of private institutions who made profit by managing the stream of debt, and thus, money. They've taken huge risks, with the knowledge that their actions will be carried through any crisis by "their" representatives in the european governmental structures. Like in the USA, there's a "revolving door" policy. (Draghi being a Goldman Sachs man) There will be no "voluntary" contribution (haircut) of the senior bondholders in this latest "bailout", since this will technically be regarded as a default and will trigger the dreaded CDS. Of course this was known beforehand, that Greece held CDS.

5. In case of a "credit event" there will be contagion and a lot of credit will dry up overnight. But what is this credit used for? What fascillitated this credit? It made unbrideled malinvestments possible, even the most profitable course of action. In doing so, the euro currency (and the debt of the souverign countries who were foolish enough to "guarantee" these assets) has become from a means to make unhindered trade possible, a tool to lever huge sums of money (compared to souverign budgets) from the public balance sheets, through bailouts (liquifying the financial system) to banks, where it's been paid out as bonus, and settled (in part) the outstanding debt of these private banks.

6. Given the course of the "credit crisis", I can only come to one conclusion, that is that if the euro-european project is to be rescued, there needs to be a settlement of debt outstanding. This can only come in three forms: Default, inflation, or REAL substantial growth. To protect the citizens from the reckless course of the financial institutions there needs to be a banking reform, seperating the investment banks from the rest. But since this was decided on, but never happened, Default of the whole system is the only thing left open if any semblance of a capitalist system is to be preserved. Otherwise, we're talking about something that resembles Leninism (not communism) in form, and corporatism (Mussolini) in intent. Well, guessing you're an american, you should know, since you already have the same system in place... (zzzzzzzzz)

7. More and more are waking up to the reality, that (even if their memory is hazy and full of obstacles) this is a re-run of 2010, and will not solve anything. TPTB will continue on this course, but, contrary to the USA, this will lead in Europe to a civil war, after the northern countries' public assets have been plundered. A "credit event" will put the disconnect of the financial system's goals of those of the communities, and economy at large in the spotlight. The european Commission and the european burocrats are of course preparing for a repressive supra-souverign euro-state, with their "Treaty of Lisbon" as a foot in the door.

8. Right now, here, in the Netherlands, the artists and musicians are protesting, since their allowances, the whole sector is going to be cut off (save some regional orchestras) like a weed. This system has been carried and build up by taxpayers, with the collective idea that a contribution will render a greater result than just straight up market forces. Their complaints gyrate arount their idea (rightfully so, or not) that they're entitled to support of the country, so they contribute to the culture, which is according to some philoshophers "the operating system" of a society. What they don't (want to) understand is that those meagre euros they've recieved are but a drup of water in the ocean compared to the profit and risk of the financial elite. They don't understand that the handout was to keep them happy, and quiet, and dependent. Now they're not needed (apparantly) they're discarded. Of course Art will not be the first, they'll continue until they have ALL. Art will be the foot in the door, to "persuade" all other parts of the social-democratic society. They're not the "sacrificial lamb" they're the first victim of doing away with a whole system (that worked!). Again: PUBLIC EXPENDITURE WAS NOT THE CAUSE OF THE CREDIT CRISIS, CORRUPTION WAS. This is a shrewd idea, since it appeals to the libertarian forces in society (that call for stopping "handouts"), but is a double door, since it removes democratic oversight of public (taxpayer) funds. The model of "benign despots that remain invisible" is out the window. It's now us, or them, and their "solution" is heading straight off a cliff, and it will end in bloodshed if the greek politicians say "yes".

How about that for a walk in the park?

Ghordius's picture

Reptil, great answer. I do not agree on the "civil war" theme, though.
As per now the US & the UK look like they will go down the inflation "solution".
In the Eurozone there are too many countries which had too many zeros on their currencies in the last 50 years, so there is a major chance that default will be the preferred "solution".

Reptil's picture

Thank you. Please expound? We nearly had one here after the politician Pim Fortuyn (a populist with dangerous ideas) was assasinated.

(this was put on neo-fascist groups and hate of immigrants, but was MUCH broader than that)

Right now, all of these forces are dormant.


Ghordius's picture

Perhaps it's only my opinion, and a very cynic one, too: I know that the recent assassination is shocking for the Dutch. From what I study about the history of the German Hyperinflation in the Twenties, there were hundreds of assassinations, mostly related to the fact that the "common worker" experienced a relative higher standard of living (rents going down, wages keeping up with inflation) which led to the fascists (claiming to represent a more and more a dispossessed "fixed rent" middle class) killing the "red" politicians.
Fascism is always lurking. Fear of inflation feeds that beast, which is always either dormant or awake. What I mean is one political assassination, while shocking, is not necessarily a relevant trend.

Reptil's picture

True, and ideed these are just predictions, projections.

The main stream media censorship is something I've been looking at in amazement. When the truth finally breaks (too late to put any alternative in action) there will be anger. It's a huge "group think", but there's direction from above. Like other manipulations, there's the risk of an "overshoot" in the other direction. The flooding of the Calhoun Nuclear Plant as the terrible plight of the japanese people has been kept out of any news, I presume because of investments in the technology and supporting structures (incl. Uranium mines).

If free discussion, and peaceful solutions are ignored, and smothered in that "group think", at some point there's bound to be a problem when large groups of the population drop from "entitled citizens with a secured future" to "debt servants that are coerced into lower living standards".

But as mr. Taleb said: The black swan is the citizens of the USA and UK not protesting in front of the banks.

So you may be right.

malikai's picture

"Those who make peaceful revolution impossible make violent revolution inevitable." - JFK

Byte Me's picture


That was very good, informative non-rant. I agree that corruption is to blame along with your other points, but with a socio-economic system so captured as the current global one is, violence would sem to bethe only solution in the age of the blog. Fifty years ago the MSM could have easily spun it to a more naïve population of 2.6 billion peeps, now, in the age of data transfer, not so easy at all..

All it takes is for a fraction of the peeps in any given country to rise up and tell TPTB to "fuck off and shove it" and you're off to the races with an incipient revolution. How fast can you say MENA?

Now, our (western) PTB see this and go into brown trouser mode spinning MENA uprisings as "pro-democracy" or "anti-repression" or "rising against tyrrany" in the vain hope that it won't 'come here'. Tough Shit to TPTB, the powder keg is about to "change state" and it'll spread from Greece quite quickly imho.

Basically, with a system so broken, it's time to send a message to the Elite that Social Treason rendered by cocking up the system (and then robbing the peeps again to 'fix' it) is so unacceptable that so doing is a capital crime couped with asset sequestration for good measure.

Capitalism is fine, but if you fuck up - you die. Not pay some pathetic fine as a cost of doing business. Tha might improve some business ethics quite rapidly. Trouble is - with a system so captured, this likely has to be done by the people, starting in Athens perhaps.

jonii's picture

Reptil: LOL. Interesting. Not saying I disagree, but are you really saying if credit dries up that that will have no effect on the economy? Also, who is going to fund the Greek gvmt once they hand out haircuts since their gvmts are still way too big and they will still need to borrow. How do you explain the panic everytime there is any uncertainty surrounding Greece? Will a run on the banks throughout Europe be just fine, and what about the ECB? Corruption was the cause of the credit crisis, I agree, but that corruption went from the rich down to the average man who thought, in Greece, that its ok to retire at 50 and not pay taxes. Now, where I disagree with the crisis and have a problem is that the banks and the rich reaped the profits while the average man was left paying everyone's bills including theirs. But, like they say about monetary policy, you can't push on a string, other people have to be complicit. Listen, I don't disagree that they will find a way to contain this b/c they know the repercussions if not. But I'm of the idea that the best course of action for the Greek people is to leave the Euro and devalue. Default and then internal deflation (lower wages and cuts) is not a good outcome. I don't see a good outcome, it's really about which causes the least damage. There is no walk in the park at the end of the day. Also, if I'm not supposed to call the crisis a crisis when I'm explaining it 3 yrs later, then what is the proper name?

Libertarians for Prosperity's picture

Good point, I didn't know about the CDS. What kind of exposure does the U.S. have to greek debt?

Financeguru500 - Trying to have a civilized conversation with doomer libertarians is exceptionally difficult, and your experience this evening is no exception. I noticed that no one has yet to give you a real answer to your original question: how much exposure (direct claims and derivatives) do US and European banks have to Greece?

Please refer to pages 102/103 of the following report by the Bank of International Settlements. This would be a good start.


France and Germany have modest direct claims (~$57B and ~$34B respectively), and fairly insignificant derivative exposure. Notice how German and French banks only show ~$2B in exposure, compared to multiples more by the public sector. On the flip side, US banks have far more in indirect guarantees (~$34B) and have little direct claims, which is perfectly fitting given Wall Street's penchant for pyramiding ponzi schemes. The real danger is not necessarily Greece, but the collective value of all the PIIGS.  The Greek numbers aren't too alarming, especially when compared to the $180B AIG rescue.  But once you begin to add up the remaining PIIGS and the numbers begin to drift over $600B, then things get very worrisome.  

Hopefully, you'll find this more useful than "your mother should have swallowed."



Going Loco's picture

Not only more useful, also more courteous, thoughtful, and helpful. The cretins who junked your response are, I assume, red-necked urban hillbillies of the worst kind. I despise the junkers.

Calmyourself's picture

The "mother" comment was a lot funnier..  You forget to address the contagion aspects of the exposure as default brings higher yields and the triggering of some nasty insurance contracts.  Frankly if you self label as a finance guru and then write what he wrote you sort of deserve the "mother" comment..

max2205's picture

And watch the run on MMFs. Who wants risk when the yield is 0.01%

dbTX's picture

the whole argument is moot. Greece will say yes, with their fingers crossed

NewThor's picture

How many Credit Default Swaps have been taken out on 

Greece's default?

How much will need to be paid out? 

Who insured the Credit Default Swaps?

If Greece's default causes a domino effect in Euro land,

how many countries have to fall/default before it hits the USA?

Nostradamus mentions Europe collapsing then Americh falling 

next at the time "The comet runs...." which is in September/October.

This is like 2008 deja vu all over again.

Gasoline sky rockets, then deflates, then the markets go....



Orly's picture

Once a "small" loss is carried to the ledger, it will have to be written-down or hedged in some way, thus the dominoes start to fall all over the place.

There is an ancient Arab fable that says a man loaded his entire tent onto the back of a camel, including the last piece of straw...

Oh regional Indian's picture

Arab fable, so apropos orly!

Is that the distant sound of a crack-back I hear?


Orly's picture

Remember all those bags of leaves?  I got poison ivy!

slow_roast's picture

You get junked for posting something you clearly didn't even bother researching.  If you had asked a question, you would not have gotten junked, but instead you made a naive statement, and thus were junked. 



financeguru500's picture

Greece is hardly exposed to a large amount of debt. In relation to the U.S. its chump change. What 120billion for a new loans to cover 3 years? Come on, if they crash it would hardly effect anyone. The European banks that are exposed will get bailed out by the E.U. which will in turn probably be receiving some money from the U.S.

I don't believe there is much to worry about.

bgilliam83's picture

Research CDS again and synthetic CDO.  Our money hungry banks probably sold 100x more synthetic insurance than the actual default in the first place.   

financeguru500's picture

There are so many CDS that have been created that they tend to cancel themselves out, even if the number is in the trillions. Good luck with your argument but it will not be a megacrash like you think

bgilliam83's picture

Again, wrong.  That would be the equivalent of betting on a baseball game and taking both sides and eating the juice.  I am more inclined to think the euro banks had a better handle of the situation and probably didn't "cancel out" the bets. Jesus Christ you are a moron.

financeguru500's picture



Actually, you are the one who is wrong. Just because you talk shit and sound arrogant doesnt make you correct.

You can also read up more on CDS on places like wikipedia but here's the short of it.

If there is "Trillions" of CDS at risk, there is a good chance that the insurance companies providing these CDS have hedged the CDS with other banks. The reason CDS tend to cancel themselves out is because many of the banks are all intertwined with hedging the CDS so that they don't have complete risk.

The same can be said about car insurance. Did you know that ALL car insurance companies in the U.S. hedge their insurance through the use of secondary companies. There is only 1 insurance company who doesn't hedge and carries 100% of the risk.