Debt is slavery… or at least indentured servitude of the worst kind. That looming mortgage, the high interest credit card debt, the short-term car loan– these are the forces that keep people from breaking free and taking action. Ironically, debt begets more debt. According to FinAid, the average US student loan debt for a four-year private university graduate is nearly $36,000, and $24,000 for public. Throw in that first car loan and maybe a mortgage, and suddenly you’re staring at hundreds of thousands of dollars in demoralizing claims on your future income. At this point, most people figure… ‘hey, I’m already in debt up to my nose, might as well get in up to my eyeballs and buy a new plasma screen on credit.’ Debt is an enormous psychological burden that influences life’s major decisions. It’s why so many people stay committed to jobs that are unfulfilling in cities they detest under conditions they find disheartening. Nobody wants to rock the boat too much… take too many risks and you could lose your job, and hence the ability to make those monthly payments. This familiar story has been playing out across the developed world for years. This is not an ill, however, that exclusively affects individuals and families. Even at the macro level, debt has the power to subjugate entire nations to the whims of their creditors. Enter the IMF.
Are they pulling a Columbo?
Welcome To Hyperinflation Hell: Following Currency Devaluation, Belarus Economy Implodes, Sets Blueprint For Developed World FutureSubmitted by Tyler Durden on 05/25/2011 16:22 -0500
"A ‘91-style meltdown is almost inevitable." So says Alexei Moiseev, chief economist at VTB Capital, the investment-banking arm of Russia’s second-largest lender, discussing the imminent economic catastrophe that is sure to engulf Belarus following the surprise devaluation of the country's currency by over 50%, which we announced on Monday. "Unless Belarus heeds Russia’s call for mass privatization
of state assets, it is headed for “hyperinflation, massive un-
and under-employment, and a shutdown of production" Moiseev concludes. Ah: "privatization" as Greece is about to learn, the lovely word that describes a fire sale of assets to one's creditors, courtesy of a "globalized" new world order. Ironically, this is precisely the warning that will be lobbed at each country in the developed world, as the global race to devalue currencies, first against each other on a relative basis, and ultimately against hard currencies, or on an absolute basis, as the world realizes that there simply is not enough cash flow to cover the interest payments on a debt load, in both the public and private sectors, that continues to rise at an astronomic rate, even as the world prepares to exit from the latest transitory, centrally-planned bounce in the Great Financial Crisis-cum-Depression that started in earnest in 2007 and has been progressing ever since. Ultimately, Belarus will succumb to hyperinflation, as will each and every other government which seek to devalue its currency (hint: all of them): "Unless Belarus heeds Russia’s call for mass privatization
of state assets, it is headed for “hyperinflation, massive un-
and under-employment, and a shutdown of production,” VTB’s
Moiseev said. The ruble will slide to 10,000 per dollar, he
added." Of course, this is the primary side effect of attempting to avoid formal bankruptcy through currency devaluation. And all those who continue to believe deflation is an outcome that will be allowed by the Fed, need to look just to the former Soviet satellite to see what lies in store for everyone currently doing all in their power to devalue their currency.
"The ECB Would Like To Thank The Academy" - Here Is What Happens After Greece Defaults: (The PG-13 Theatrical Version)Submitted by Tyler Durden on 05/24/2011 18:00 -0500
A few days ago we presented a realistic, if somewhat somber, outlook of what would happen when (not if) Greece finally pulls the plug on its vegetative existence, and its paralyzed body will no longer serve as a breeding ground for maggots of the financial innovation variety. Today, we present a far more comedic one, courtesy of the ECB's Christian Noyer, who makes it all too clear: Europe is not in it to bail out itself and its banks which would topple like a house of undercapitalized, under-MTMed, and uber mismarked cards, but only to protect those poor sad souls of Greece from the "Horror" that would be unleashed when a Greek free fall bankruptcy finally arrives. Truly, the humanist ECB is doing god's work on earth. Try not to laugh while reading this.
Certainly no one should expect Europe’s banks to suffer their own losses after making idiotic loans to corrupt governments. It’s much easier to stick the people with the bill by establishing a trillion dollar bailout fund with taxpayer money. Problem is, people in Europe are starting to wake up and get it. The anti-euro “True Finn” party in Finland recently surged in the polls to become the country’s third-largest political party and a major obstacle for any European bailout. This weekend, Spain’s ruling Socialist party was hammered with losses as voters voiced their utter disgust with the current government’s handling of the economy. In Germany, this year’s state election results are showing that voters are sick and tired of shouldering the financial burden for the rest of Europe. Chancellor Angela Merkel’s ruling party is losing miserably, though in a pathetically desperate move, some local governments are changing suffrage limits and allowing 16-year olds to vote. This is the strongest indicator yet of how bad the situation in Europe has become: German banks are so over-exposed to the PIIGS sovereign debt that, in the face of political revolt all across Europe, German politicians have resorted to recruiting the Justin Bieber crowd to maintain the status quo.
Jean-Claude Juncker - Europe Is Doing God's Work By Lying About Greek Insolvency, And Keeping EURUSD Longs ProfitableSubmitted by Tyler Durden on 05/23/2011 07:51 -0500
A few weeks ago, the entire world was made aware that nobody in Europe is to be trusted any longer after Jean Claude Jun(c)ker admitted he lied to the media ahead of what Spiegel had leaked earlier was a "secret" meeting to kick Greece out of the eurozone (turned out to be only half true - Greece was not and will not be kicked out... voluntarily). The purpose for the lie: "self-preservation." Today, in a much anticipated showdown between the magazine (which Greece said would sue for spreading salacious, yet true, rumors), and the bureaucrat, we learn that it is not Goldman, but Europe, that is doing God's work by lying on a daily basis about the Greek insolvency: "The most important commandment is not to inflict harm on others. Although it isn't stated quite that way in the Ten Commandments, it follows from them. The finance ministers of several Euro Group nations had agreed to meet on Friday with the president of the European Central Bank (ECB), Jean-Claude Trichet. Because the financial markets in Europe were still open and trading was still underway on Wall Street, we had to deny the existence of the meeting. Otherwise the course of the euro against the dollar, which had already fallen as a result of your report, would have plunged disastrously." Ah yes, doing God's will by focusing on the greater good, which is making sure those EURUSD longs are not impaired. If this is not confirmation that Europe is run by sociopaths, then nothing is. All this, and much more, including such pearls as "If the donkey were a cat it could climb a tree. But it is not a cat" read the full surreal interview below.
He could be guilty. But he deserves a fair trial, and someone's making damn sure he doesn't get one.
FITCH DOWNGRADES GREECE TO 'B+'; RATING WATCH NEGATIVE
The Greek CDS market is actually fairly small. According to DTCC, there is only 3.8 billion euro of net CDS exposure on the Hellenic Republic. That compares to almost 300 billion euro of debt outstanding. There may be some additional exposure to Greece cds since it is included in SOVX, but the Greek portion of net SOVX exposure is very low, and some of the exposure is offset by investors who trade 'cds index arb'. Not only is the 4 billion euro of exposure relatively small, most of it is held in mark to market accounts, so a lot of the loss to the system is already accounted for. Since the net exposure is small, banks are likely beneficiaries of a credit event, and markets will see through this feeble attempt at avoiding the stigma of a default, the EU finance ministers should stop worrying about how a restructuring will impact CDS. They should focus on restructuring in a way that provides the best possible outcome for Greece and creditors and not worry about what happens in the CDS market as a result. If after sorting out the Greek situation, they still have time to think about CDS, they should spend that time figuring out who sold the protection and why? For every evil, vile, nasty, hedge fund who had bought credit protection, someone took they other side and sold protection? If the purchasers are so evil, does that make the sellers angelic?
Some say that QE3 won’t happen. The U.S. is done with stimulus and force-feeding liquidity and inflation down the world’s throat. Okay, it’s austerity then. How much austerity does anyone think we’re going to have here in America? What is the critical mass and when will we reach it? How much inflation can our creditors handle before they reach their critical mass and have to allow rates to rise? Paradoxically enough, the real question has become ‘can we afford austerity’? I believe the answer is ‘not anymore’. Due to relatively recent events, austerity has become a mathematical impossibility.
Only The Bernank is fool enough to lend money to US at these rates but, then again, he's only lending us our own money so it's not like he himself is taking on any risk at all.
And so the stealthy campaign by Europe to asset strip its debtor prison nation continues. After on Saturday it was made clear that Europe will force Greece to issue an effective DIP loan ahead of its own bankruptcy, collateralizing post-petition creditors, and pushing existing sub noteholders lower in the cap structure, so the same scheme will now be used by Europe to grant Portugal rescue funding in exchange for Finland's "agreement" to help save the country. Per Bloomberg: "Finland will back a bailout for Portugal provided the third euro member to require aid in 12 months agrees to conditions including state asset sales. In addition, Finland wants a guarantee that bailout donors will get their loans repaid before private investors, he said." Which simply said, means that as PIIGS, already held hostage by a monetary union which threatens with world extinction should it be unwound, and by bankers who promise to never lend money should they be forced to take even once cent in senior debt impairments, will next be forced to literally sell themselves off at n blue light special auctions, where the liquidation sale biggest bidders will be none other than the very same financial institutions who have put these countries in their terminal predicament. Incidentally, all this is coming to municipalities and local governments in the US very, very soon.
Because one video is worth one thousand pictures...
This weekend’s not so secret meeting was the first step towards what could be a rapid end game of Greek debt restructuring. The lenders are unlikely to give Greece the exact same terms as Portugal and seem intent on demanding collateral against future loans. Greece must resist providing collateral since it now realizes it will not be able to pay back all the debt. Greece will push hard for better terms, but if collateral is required, it will be in Greece’s best interest to restructure sooner rather than later. Since the sovereign restructuring process is a negotiation without much ability to use the courts, Greece will find a way to minimize the damage to itself and its citizens while creating a debt structure that is sustainable. This will all be done while retaining the Euro as its currency. Greece may be looking at re-introducing new Drachmas, but this round of restructuring will still be in Euros.
Moody's Investors Service has today placed Greece's B1 local and foreign currency government bond ratings on review for possible downgrade...Moody's says that a multi-notch downgrade is possible if it concludes that there is large risk that Greece's debt metrics are on an unsustainable path. In Moody's view, such conditions would materially increase the risk of debt restructuring over the short to medium term. Under such conditions, euro area policymakers have stated that future loans from the Exchange Stability Mechanism would be extended only if private creditors were to bear some of the losses. If the path of Greek debt-to-GDP were to appear unsustainable, then Greece might itself have an incentive to seek a change in the terms of its debt obligations.