Greece

The world is awash in garbage debt. The only reason the banks and others haven’t taken the “hit” that they NEED to take is because they’ve bought out the politicians. Put another way, we are seeing clearly that the two primary principles of the West (capitalism and democracy) have both become jokes: alleged “capitalists” like the banks don’t ever actually see losses for mistakes and “democratically elected” leaders are in fact owned outright by the banks via donations/ bribes.

That Greeks are massively against being "bailed out" in a circular process whereby Europe's bankers rescue Europe's bankers, using Athens as an intermediary is no surprise. What is perhaps also not surprising is that German, or the citizens of the country to truly benefit the most from the "rescue" are also very much against this bailout. According to Goldman's Dirk Schumacher, a poll published in FAS newspaper this Sunday showed that a majority of the surveyed were against any further financial help. Back in May, a slim majority was still in favour of additional support for Greece. The poll also asked how the Euro's future would be assessed: some 71% voiced 'doubts' or 'no trust' or 'no future' for the Euro. Meanwhile, the discussion between the finance ministry and banks about a roll-over of maturing debt continues. The German finance ministry expects banks to make specific proposals during the course of the week. Finance minister Schäuble rejected again the idea of any financial incentives for banks to participate in a roll-over, arguing that banks would have a strong interest themselves to stabilise the situation. The finance minister also said that governments would take preparations for the case of a Greek default if the Greek parliament were to reject the new austerity package this week: "We need to make sure that the contagion risk for the financial system and other Euro-area countries remains low".

With Greece set to dominate the news flow once again in the upcoming week, the question on everyone's mind is what would happen "if Greece says no", preferrably with some more nuance than just "the end of the world." So for everyone inquiring, here is SocGen's Michala Marcusen with a full timeline of the "what if" scenario.

Greece will remain the main focus of attention. As it stands at the moment, the Greek Parliament will begin to debate the medium-term fiscal plan and the implementation laws on Monday. Voting on the legislation will occur on Wednesday for the Medium-Term Fiscal Strategy and Thursday for the implementation law. After the government won a vote of confidence, the assumption is that the required legislation will pass through parliament. However, reports that several PASOK members will potentially vote against the measures will likely add to the uncertainty ahead of the outcome of the parliamentary vote. On the assumption that Greece passes the required legislation, on July 3, the Eurogroup will authorise the disbursement of the fifth tranche of the current package, and on July 11, will unveil the new funding package for Greece. Again on the assumption that Greece passes the required legislation, the macro data will become front and center on Friday, given it is the first day of the month we will get the release of PMIs globally.

With just days left until the crucial vote on passing the Greek mid-term austerity package, the assured destruction rhetoric used by the Greek status quo has hit fever pitch. Just to make sure the message is not lost on the broader population that Europe's banks will not admit defeat in a vote that could end the kleptocratic cartel's hegemony for ever, Greece's Deputy Prime Minister Theodoros Pangalos has blasted suggestions that it would be better for his country to abandon the euro and return to the drachma as an "immense stupidity". He didn't stop there. For dramatic impact, the Greek vice PM also said that the country would devolve into complete anarchy, with tanks roaming the streets, a population on the verge of civil war, with mass suicides, just for dramatic impact, should bankers not get their way. More or less in line with the Hank Paulson script that is regurgitated every few years when the Ponzi system is on the verge of imploding yet again.

With the resurgence of Greece back to the top of global news, incompetence and labor strikes charts (just like back in 2010 at roughly this time, which is to be expected since 2011 has been following the 2010 script to the dot) there has been far too little focus in the mainstream media on the family whose actions were responsible for Greece's rise to glory and subsequent collapse into default. As Associates Press notes in its report the ruling family, "One family has dominated Greek politics for more than half a century: the Papandreous." For all those who are wondering who the men behind the curtain, or as the case may be, front and center, are, the following expose is for you.

Somehow the fact that Greece has "reached" a deal on its austerity plan is supposed to be good for 100 pips on the EURUSD even though this is not news, and has been priced in for a long time. Furthermore it does absolutely nothing to dampen the fear and loathing that this plan will be met by the broader Greek population. But with markets that have absolutely no liquidity and monkeys controlling the buy and sell algos, one can only sit back and laugh.

The last time Greece had a full day strike was a week ago on June 15, when labor unions decided to cut another 0.15% from Greek GDP by doing absolutely nothing, and events on Syntagma square reached the highest level of violence so far in 2011. And unfortunately for the Troica, Greece seems to have realized that the best way to make sure the bailout program craters is by continuing to miss all IMF output and production targets. As a result, as Athens News reports, "according to the General Confederation of Workers of Greece (GSEE) and the civil servants' umbrella federation Adedy, the 48-hour strike is an escalation of their recent industrial action comprising 24-hour nationwide strikes in protest of the medium-term programme. A main demonstration will be held on Tuesday, June 28, at the Pedion tou Areos park in central Athens at 11am, while on Wednesday another demonstration will be held in downtown Klafthmonos Square." As a reminder June 28, is the far more critical Greece austerity vote, which unlike the vote of confidence in G-Pap, already has several PASOK members saying they will vote against it.

Just when you thought you had seen it all...

The eurozone is in serious trouble and Greece is just a symptom. Whether or not they default on their debt may not matter as similar problems plague Spain, Ireland, Portugal, and even Italy. The European Monetary Union is built on a house of cards and they don't have the time for needed radical reforms. Like all sovereigns who owe more than they can pay, they will resort to monetary inflation to bail themselves out. This article explains how the EMU works, why it is failing, and why they will resort to fiat money printing to solve it.

On the day when the flawed euro experiment will get its first popular pseudo-referendum, it is only logical that prominent euroskeptic Nigel Farage would sound off on how he sees things for Greece, Europe and the currency union, and why he believes the current situation is nothing short of slavery: "Listen to Borges state: "We really believe that many of the current problems result from incomplete integration. In the process of developing monetary union like the United States, which is a fully integrated monetary union, you have obstacles that magnify the problem." What he seems to forget is that final fiscal and monetary union in the US only happened after the then bloodiest war in history, in a country that was already united by language law and customs. It is extraordinary that the IMF is suggesting that this economic crisis is in any way synonymous with what was happening in the US in the 1840s. The only slavery here is of the people to the Eurocrats dream. For without democratic control, we are left with something akin to slavery."

Just like last year at about this time, the tables are turning on the funders of the latest Greek bailout. As Athens News reports: "Austrian mass-circulation tabloid Oesterreich, expressing rising taxpayer resentment around the EU, called for an EU-wide plebiscite "to let those who have to pay for Greece decide" whether to rescue it again or preserve "a euro without Greece"...[it also said] zigzagging over Greek aid pointed to a lack of a strategy allowing "shameless financial markets (to) blackmail apparently helpless politicians", and it called for an EU-wide referendum." Elsewhere, Geert Wilders, head of the third largest Dutch political party, the Party For Freedom, said "Greece should leave the euro zone and reintroduce the drachma (pre-euro currency). No more Dutch tax money to the corrupt and de facto bankrupt Greek." So the end result is that once again neither the Greek nor the European population wants the latest bailout that is forced upon them by the banking system, which is terrified about what happens if failure is reintroduced as a final outcome. Yet while it will take a lot to organize Europe's conflicting popular interests, the immediate decision-making power resides with Greece, where in just over 24 hours the all-critical vote of confidence in the ruling party will take place, whose failure is simply unthinkable in terms of downstream effects for the Eurozone. And as anyone familiar with the constitution of "united" Europe can attest, the jettisoning of Greece from the currency union will be next to impossible without a thorough redo of the bylaws of not only the Eurozone but all other artificially unionizing constructs that will promptly be forced to unwind should Greece "just say no" to more banker bailouts.

Goldman Sachs summarizes the key events in what promises to be a most exciting week: "The Eurogroup Finance Ministers are meeting Sunday night and Monday (June 19-20), while a G7 conference call on Greece is scheduled for Sunday night as well. Germany has already softened its position regarding private sector participation in a second Greek support package. More headlines with respect to the Greece rescue can be expected in the coming days. The upcoming week will also be marked by the EU summit of Heads of State towards the end of the week. Beyond Greece the two key events are the FOMC meeting and press conference, which will be interesting, given the Fed currently faces a challenging deterioration in the growth-inflation trade-off. Finally, cyclical data disappointed last week, further adding evidence of a "soft patch" with the Philly Fed and the U of Michigan consumer confidence reports printing below consensus. Next week, we will find out whether European survey data and US durable goods orders confirm this trend of cyclical deceleration or whether they point to cyclical divergence across the Atlantic."

Blah Blah Blah. We are broke. Blah Blah Blah

In the past few days reporters from Bloomberg, Reuters, and the FT have all basically said the spread is a per annum fee to insure against Greek default. That is not actually correct. If someone buys 10 million of 5 year Greek CDS at 2000 they do NOT pay 2 million per annum until the maturity or a Credit Event occurs. They pay 500,000 annually, quarterly in arrears until the scheduled maturity date or a Credit Event occurs, AND they pay 3,662,325 up front. This is a big distinction. It is true for all CDS. The quoted running spread is converted to an upfront payment based on an actual running spread of either 100 bps or 500 bps depending on the name. Certainly for tight names, this difference is more of a technicality, but for distressed names it is meaningful.