Is there Eurozone warfare going on right now? William Engdahl thinks so, and what he has to say might surprise you.
If only the Greeks were as passionate about maintaining the debt of their economy at a reasonably insane level, as opposed to the "full retard" reserved for banana republics such as the UK and the US, as they are about striking when it comes to preserving their entitlements, Europe would have a budget surplus of several quintillion. Today, and tomorrow, and likely everyday thereafter, Greece will be shut down as billions in non-taxable economic output is eliminated, trade is shuttered, and the tourism industry is dead. And since hospitals are also on strike, tourism may be the least of the casualties. Bloomberg reports: "Greek government workers shut down schools and hospitals and disrupted flights as demonstrators occupied the Acropolis in an escalation of protests against 30 billion euros ($40 billion) of additional wage cuts and tax increases unveiled this week." And no, there is no hope: "“Protests will increase,” said Spyros Papaspyros, the head of ADEDY. “Opting for the easy path of cutting wages and pensions can’t be accepted.” In essence, the Greek people would rather see their country bankrupt, the EMU destroyed and their nation locked out of the funding market for the next decade than have to retired at age 63. But at least they gave us democracy.... The same democracy that will see the Supreme Court soon side with the Federal Reserve over 300+ million US citizens.
Help those most in need
Yes, you read that correctly! Greece killed its own banks. You see, many knew as far back as January (if not last year) that Greece would have a significant problem floating its debt. As a safeguard, they had their banks purchase a large amount of their debt offerings which gave the perception of much stronger demand than what I believe was actually in the market. So, what happens when these relatively small banks gobble up all of this debt that is summarily downgraded 15 ways from Idaho.
What do you do when you are the prime minister of a bankrupt country and your only recourse is to get the Washington D.C.-based IMF to come in and tell you you have to cut wages by about 120% and fire 75% of the country (especially after the same Germans you recently demanded WWII reparations from, mysteriously have decided in the eleventh hour to have their last laugh at your expense). Why, you send in the national guard, armed with fake six-pack ridged bulletproof vests and gas masks, to repeat the miracle of Thermopylae against the marauding population which has suddenly realized that the past 10 years of chimeric happiness were a one-time miracle thanks to Mr Goldman and fat, and somewhat stupid, uncle Almunia. The next thing you do, once you realize you are about to have a [revolution|uprising|civil war] is to declare a moratorium on your €300 billion of debt, make your people happy and stick it precisely to the same bankers that you complain about every single day for "speculating" against you. Tomorrow Greece will face the trifecta of a much delayed hangover as 1) its bonds hit 9% as the hedge funds who have been buying up in expectations of a snapback capitulate, 2) EuroStat declares its deficit was officially 14%, and 3) a Greek civil servant strike in their fourth national walkout this year.
"Despite the contortions of the pundits, it looked (from the playing field) like the selloff was 75% Greece and, maybe, 25% Goldman. The selling was quite broad. Nearly 80% of the stocks that traded closed down. The added problem for the bulls was the increased volume brought on by the option expiration. That made Friday a clear distribution day in the key indices.
Traders headed for the ritual marination wondering what the next step in the Greece situation would be. Reports were that the ECB and IMF might be in Athens as early as Monday. It sparked the bulk of post close conversation." - Art Cashin
Claims GS “controls the wind”
Greece is giddy about not only placing 3 and 6 month Bills, but also upsizing the issues from €600 to €780 million. Well, when the yield involved is more than double that of just 3 months ago, and an all time records, and the country has the full backing of the EMU, and the IMF just created a $550 billion new bailout credit facility to make sure nobody ever fails, we are shocked it took yields of 4.55% and 4.85% to get these done. To be sure, without the bailout of Germany et al, Greece would have been paying 7% on both, meaning the 2% differential is now implicitly (for now) borne by German and American taxpayers - that amounts to $42 million. Next up: let's see if Greece can price something beyond the immediate near-term horizon, especially past the guaranteed 3 year point.
Enter the announced Greek Bailout that doesn't bailout! Greece's problems are much, much deeper than the mainstream press is revealing. Let's walk through the latest bailout propaganda then step through a few facts that should embarrass anyone even considering buying those Greek bonds.
On a sunny weekend in September 2008, a bunch of CDS traders were summoned at noon with the advance knowledge that Lehman was filing that midnight and to trade out of Lehman counterparties positions asap. On a sunny weekend in April 2010, a bunch of fat European bureaucrats were summoned to a videoconference to bail out Greece (for the 4th time) and achieved absolutely nothing new (for the 5th time). The latest episode in the Greek tragicomedy adds exactly no information to what was expected to be a firm bailout package: hold on a second but we knew the last weekend of March that should Greece demand help it would be bailed out by the ECB - so just what is new here? Ahh, anything to create the illusion of forward progress. In continuing to munch the non-austerity cake and have it too, the package is not really operational until Greece demands it. Which they won't until creditors put them in involuntary bankruptcy after coupon non-payment. Presumably the final rate agreed upon is 5% for a three year loan: how some bureaucratic soothing words can hope to push the entire Greek curve down by over 200 bps will be very fun to watch. Then again, as the curve will likely continue to be inverted, we dont expect much normalization for the 10 Year, as the country will most certainly be bankrupt by 2020. Lastly, to show just how serious the ECB is this time, any coordination with the IMF will not begin until tomorrow. We sure feel bad for all those traders who are now told by their superiors to buy the Greek €1.2 billion in 6 and 12 month bills on Tuesday, as any hope of return of capital now rests with whatever new insanity Brussels can cook up next. Paulson's gun is now firmly in control of the Greek/ECB, and is now thoroughly empty after repeated own-foot shootings. And while we are on the topic of IMF-assisted suicide, the next full day of Greek strikes is now set for April 22, when Greek civil servants will walk of the job for 24 hours according to an ADEDY union official.
Greece Rebels, Does Not Want IMF Participation In Bail Out; Fears IMF's "Intolerably Stringent Conditions"Submitted by Tyler Durden on 04/05/2010 19:58 -0400
The soap opera that just refuses to die, is just getting better and more bizarre by the day. The latest lunacy out of Greece, as reported by Market News, is that the near-bankrupt country is now imposing its own conditions on the bailout, saying it wants to amend the deal struck recently by Eurozone lenders, and wants to bypass the IMF's financial contribution, and eliminate the role of the IMF entirely, as it is "concerned that intolerably stringent conditions would be imposed by the International Monetary Fund in exchange for aid." Did anyone over in Athens even bother to read the fine print of what austerity means? It is good of the nation to finally wake up before suckering in US taxpayer dollars that, of course, would have never been repaid. And with that America, and the IMF, should wash their hands off the whole offer, and throw the ticking time bomb squarely into Merkel and Sarkozy's court where it belongs, together with the $1.5 trillion in Club Med bank claims that the Eurozone is on the hook for if, and certainly when, things go sour.
If this article goes viral around the web, I wouldn't be surprised if the euro tanks and several European sovereign states' spreads blow out. I have busted several of them in another of a long series of "creative" economic forecasting schemes to fudge the appearance of "austerity".
First 130 Congressmen, now Greece: the examples of people who have no idea what the definition of negotiating leverage means just don't stop. G-Pap has decided to go all in on 2-7off suit . The problem is everyone knows what his cards are, and his bluff is about to be promptly called by everyone; too bad the Cyclades are still not in the pot. Give them a few weeks... Bloomberg reports that: "Greek Prime Minister George Papandreou set a one-week deadline for the European Union to craft a financial aid mechanism for Greece, challenging Germany to give up its doubts about a rescue package." And here we were thinking only Bernanke was clinically insane. G-Pap, it turns out, is shocked that someone can just say no to his generous offer of allowing someone else to bail him out. Act now, or in one month when you can buy Greece (and its islands) in a 363 sale, it will be too late (to overpay).
The Greek saga continues, exactly as was anticipated. For all of those who don't regularly read me, this is really not about Greece but about the start of either default or significant depression throughout a large swath of the Eurozone. Greece is the firestarter and it looks as if we are starting to burn...
A smattering of the relevant headlines which are causing Greek spreads to widen as investors realize they have been lied to once again.
04:51 03/18 GREEK PM: GREECE WILL NOT DEFAULT
04:51 03/18 GREEK PM: NOT LOOKING FOR PARALLEL NATIONAL CURRENCY
04:50 03/18 GREEK PM: OFFER OF HELP ON TABLE WOULD HELP FIGHT SPECULATORS
04:50 03/18 GREEK PM: WOULD PREFER A EUROPEAN SOLUTION
04:49 03/18 GREEK PM: GREECE IS TALKING TO THE IMF
04:49 03/18 GREEK PM: MUST PURSUE REFORMS TO INCREASE COMPETITIVENESS
04:45 03/18 GREEK PM: IF NO SUCH PLAN IN PLACE, GREECE MAY NEED IMF HELP
04:44 03/18 GREEK PM: IMF-STYLE HELP COULD BE OFFERED ON "AD-HOC" BASIS
04:44 03/18 GREEK PM: EUROPE MUST BE PREPARED TO OFFER IMF-STYLE HELP
04:43 03/18 GREEK PM: GREEK NOT IN NEED OF IMF LOAN
04:32 03/18 GREEK 10-YR SPREADS WIDEN 6 BPS TO +306 BPS AS GREEK PM SPEAKS
05:40 03/18 GREECE PM:IMF SAYS OUR PLAN QUALIFIES US FOR IMF AID IF NEEDED
Market pundits scrambled to fill up air time by attributing the market movement to this data or that comment. The market rally catalyst was quite singular however. As rumors spread of a firmed up Greek rescue package, and the S&P suggested it was shifting Greece out of ICU, the Euro soared. It spiked 0.7% which is a significant move in the currency arena. The result was immediately evident and dramatic. Gold spiked $20 and oil shot up over $2. Those moves came long before the FOMC statement. Those moves were not influenced by some piece of economic data. Those moves were not the result of some shift on the outlook for the President’s health plan. Those moves were the direct result of the jump in the Euro and the correspondent weakening of the dollar. We believe that the Euro/Dollar move was also the primary catalyst in the stock market. Given the action in gold and oil, the stock market’s reaction was rather mute. With such a strong tailwind, you might have expected something like a 100/150 point move in the Dow. The real question on stocks was what was holding stocks back given the currency boost.