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Greece Has Proved That the ECB Bailout Scheme is Based On Nothing But Lies and Fraud
I’ve assess the significance of the Greek elections in an earlier article.
However, there is one final element to Greece’s current predicament that is even more important than any of the above items. That element is the following:
The Second Greek Bailout has proven to be based on a total and complete lie on the part of the ECB and EU politicians.
If you’ll recall, during the Second Greek bailout, private Greek bondholders were told that they HAD to accept the terms of the bailout (a 70% haircut, and new bonds with lower interest rates and longer repayment periods). The alternative to this, as promoted by the ECB and EU politicians, was the total loss of money.
As you may or may not know, only 97% of private bondholders went for the deal. The remaining 3% (representing roughly €6.5 billion in Greek debt) decided they would maintain their bond holdings as they were and see if they got their money back.
Last Tuesday, Greece was scheduled to make €436 million in principle payments on this €6.5 billion. And it did. Every single penny.
And they didn’t even have to! Indeed, under normal conditions if Greece missed this payment deadline, it would have seven days to make the payment. However, this time around, Greece had 30 days to make the payment before it would be considered to be in default.
And Greece chose to pay bondholders every penny right on time.
Put another way, those Greek bondholders who DIDN’T go for the Second Bailout, just got their money back at 100 cents on the Dollar (compared to those who DID go for the Second Bailout and lost 70% of their money).
This has shown the ECB and EU bureaucrats to be complete and total liars. It also shows the entire bailout/ austerity measures process to be garbage. Private bondholders got screwed. Greece got more debt and an even weaker economy. In fact, the only group that has so far gotten through the Greek mess relatively well has been the ECB, which swapped out ALL of its Greek exposure for bonds that DIDN’T take a haircut.
The significance of this cannot be overstated. The Second Greek bailout has shown the whole of Europe the following:
- Bailouts don’t work (Greece actually now has more debt than before).
- Austerity measures worsen the economy.
- Private bondholders get screwed.
- The only one who comes out clean is the ECB.
All of this ties in with the rise in Nationalism I noted earlier. THIS is why voters in Greece, France, very likely Ireland (whose referendum is on May 31st), and other EU states are voting incumbent Governments out (especially those that have supported the ECB’s moves) and showing increased support for Nationalist parties. The people have read the writing on the wall and the writing makes it clear that they are going to get screwed while the EU bureaucrats stay in power.
This is why yields on Spanish and Italian bonds are rising (as I write Italy’s ten year is close to 6% and Spain’s ten year is at 6.2%): bond investors know that if they continue to maintain their exposure to the PIIGS, that at some point they’re going to have to negotiate with the ECB. And that means losing a lot of money.
On that note I fully believe that the EU will collapse before the end of the summer. So if you have not taken steps to prepare for the end of the EU (and its impact on the US and global banking system), you NEED TO DO SO NOW!
I recently published a report showing investors how to prepare for this. It’s called How to Play the Collapse of the European Banking System and it explains exactly how the coming Crisis will unfold as well as which investment (both direct and backdoor) you can make to profit from it.
This report is 100% FREE. You can pick up a copy today at: http://www.gainspainscapital.com
Good Investing!
Graham Summers
PS. We also feature numerous other reports ALL devoted to helping you protect yourself, your portfolio, and your loved ones from the Second Round of the Great Crisis. Whether it’s a US Debt Default, runaway inflation, or even food shortages and bank holidays, our reports cover how to get through these situations safely and profitably.
And ALL of this is available for FREE under the OUR FREE REPORTS tab at: http://www.gainspainscapital.com
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I'm not greek, and I consider the person wo OK'd this payment to be guilty of treason. In fact I'd say it justifies an over throw of their government. they hare having trouble feeding people and 20 plus percent unemployment, but the bonds are paid in full.
I wrote martin wolf of the ft saying this payment proves a lot. Of course no mention in that paper and nothing about the supreme tragedy of this happening. I'd send you article to the ft, because somewhere on their letter page there should be some real moral outrage.
Gee, in the good old days, sovereigns paid the locals, who kept them in power, and stuffed it to the foreign suckers. If this isn't proof that the markets are rigged, then I don't know what is.
Greece is broke and won't pay back its debt because it simply cannot, just like an average American worker cannot afford a $40k/mortgage a year. It has nothing to do with laziness but much more with lack of basic economics understanding. You cannot spend more than you make and you should never lend more than what the borrower makes.
The fucking mess could have been solved years ago. It would have been painful but short. Now we have to go through something painful that lasts years and years. Fucking morons.
This is what Graham deducts from his ramblings? The end of the EU?
The EU will not collapse. The Euro will stay. In a different form maybe, sure, but that will make it an even stronger - reserve - currency.
Each country might get its currency back. Yup. So what. SEPA will make the Euro the trusted currency of choice in a turbulent (multi-currency) EU:
http://en.wikipedia.org/wiki/Single_Euro_Payments_Area
Have you ever really worked for a living Graham?
I think you mean "deduce", but agreed
There will be no Greek exit from the E.U. They may temporarily use a different currency, but that's the maximum extent of things. The decades of planning will not be cast aside so easily by the plutocracy, the European aristocracy, whatever you wish to call them. The European Union is literally their life's work. Them and their parent's who passed this great work onto them, the sons of the ancient European Aristocratic families.
I've said it before and I'll say it again, there is no European Crisis other than what has been engineered by the central planners. This is not a meteor about to land on Europe, but an artificial crisis in an artificial system created by man and controlled by man. Therefore, it can be manipulated by powerful men to achieve their goals.
Their goal is a closer economic union amongst European states. Their goal is the eventual destruction of national sovereignty for each individual Europen state. This "crisis" has been engineered to achieve that goal. As George Soros and so many before him have said, in a crisis you can do things that would otherwise be impossible. You can pull the USA PATRIOT Act out of the drawer and start spying on all Americans, for a recent example. "Crisis" is good for the plutocracy, it only makes them stronger.
http://www.iii.co.uk/news-opinion/reuters/news/36496
They're meeting again in June to discuss, not the breakup of the E.U., but further and more tightly binding its member states together. Euro bonds WILL happen.
"Senior EU and U.S. officials said Hollande raised the topic of euro area bonds - bonds jointly underwritten by all euro zone member states - during G8 talks at the weekend and would again push it when EU leaders meet in Brussels on May 23."
"Proposals are expected to include boosting the paid-in capital of the European Investment Bank and plans for 'project bonds' underwritten by the EU budget to finance infrastructure."
"The aim is to agree ideas that can be formally signed off at the next summit on June 28-29."
Dear Graham is apparently not able to distinguish between the EU and the EUR monetary zone.
Even the strictest of austerity measures could not help a country without a printing press to pay INTEREST. Only the principle of the loan is handed over, the interest has to be borrowed. It's a fucking ponzi scheme you stupid fucking MORON.
Austerity measures worsen the economy...
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your a tool and a fool
These articles just illustrate why we should all take our notepads in the crapper. What better source of ideas!
Read Greeks are taking the money they pulled out of banks and are paying cash directly to farmers for food, cutting out all middlemen. Retail stores, banks, transportation costs. Americans could take note. And no, the farmers are not deposting anything in any bank, another good development.
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Hey, GS, if we assume that Greece is merely the conduit for pushing more free money to fraudulent banksterz, and that Greece receive no actual additional cash for disbursement to their citizens, then....
A Greek succesion would merely sabotage the Banksterz' flow of money.
GREECE needs to stop this morphine-drip before they are cited for Over Serving a customer. You know, there are laws that can prosecute a bartender who continues to serve a customer who is "impaired". This world is fucked up, sideways, longways, and inside out.
BTW if I didn't say it, I totally agree with your headline.
Has anyone vetted this mope?
Has he ever called something early and novel, or just a "mee too" of what is common knowledge>?
I said the same thing recently. His entire business model is taking things discussed on ZH 1-2 WEEKS ago and selling to people that dont know about ZH. Hes behind the curve AGAIN. With PSI bonds trading at 20% yeilds anyone that Participated in PSI is down 90%+ not 70%. Look for that little gem in Next momths investor letter. Probably using it to push PMs without telling his readers the difference between inflation and deflation and which comes first.
Funny thing though.
2 weeks behind ZH is still 2 weeks ahead of CNBC.
Last Tuesday, Greece was scheduled to make €436 million in principle payments on this €6.5 billion. And it did. Every single penny.
Dude, €6.5 Billion would = Principal Payment on €6.5 Billion in Greek bonds. Please explain discrepancy.
The entire 6.5 Billion is not due at the same TIME.
Phoenix Capital has proved that its bullshit scheme is based on nothing but lies and fraud.
There, fixed it for you.
A coercive exchange is considered a default. This issue is already being litigated. They had to pay it otherwise the litigants would have evidence the exchange was under duress.
Now greece can say there were no official threats from the debtor and those who didnt voluntarily exchange bonds were paid on time, proof the exchange was purely voluntary
Geez, doesn't Graham harp on about the same bloody thing over and over and over again. A little re-write here, a lot of plagiarising there. Oh yes.
Do people really sign up for this stuff? Everything he writes about has been discussed by ZH'ers way before he posts it.
Please for the love of God Graham, you can give yourself a high five when it eventually comes crashing down and you wax lyrical that you called the crash in 2008, 2009, 2010, 2011, 2012, but for now, please, I am choking on your snake oil.
Graham-baiting is one of the few light diversions left on this site
Yeah its a real bummer Leo is gone
i miss Leo too because he'd bite so you'd get a 2nd chance to harrang him
Graham just plods on from his ivory tower unabashed and unashamed, maybe he's a bot?
and these exudations are increasing alarmingly in frequency
Investment advice hyperinflation
I just flew in from Europe. Boy my arms are tired.
Email me for your free report.
Graham, you seem to have discovered a few problems in Europe. Why don't you write a little more about them?
The Greeks probably figured that times are tough enough without the British Navy showing up and buggering all their menfolk.
Ahem, not that there's anything wrong with that.
Well, having been reared in Greece would be good preparation for that...
December 2012 will mark the total collapse of europe and maybe the end of the human civilization.
I had no idea we are civilized, thanks for the interesting thought !!!
we are civilised
it's Govt that un-balances society and wrecks the economy and creates anarchy (see Greece, and coming to a nation near you shortly) until the civil are driven to revolt against the lying thieving scum
Europe maybe, but civilisation? Care to make it interesting? I'll offer you 100 to 1 odds not a damn thing happens to 'civilisation'.
Graham? That you Graham?
Now the cat is well and truly among the pigeons. Fool me twice, shame on me, and all that...
You missed the one key factor that these 3% were actually all Bonds under British law.
I think that's the critical factor here, The Reich, and would seem to negate the logic behind this whole rant.
I don't want to pile on, as usually I enjoy reading Graham's articles, unlike most around here apparently, but we've seen any number of articles on here discussing the key difference in those bonds. Here are a few:
Greece Set To Default On Foreign-Law Bonds On May 15
Greek UK-Law Bond Arbitrage Hits Record
As New Greek Bonds Tumble To All Time Lows, Is Greece About To Re-Default In 5 Days?
They wonder why investors don't trust the markets.
Bondholders of anything are getting routinly SCREWED by politicians (Barry fucked GM bondholders for votes).
Greece SCREWED bondholders because they could.
Fucking bondholders is a sure way of killing future sales.
Tell Whalen, when he comes up for air.
Yeah, lies and fraud! Those dum-dums! Poo-poo heads!
The Greek take on it: http://youtu.be/Zvl9N9GdraQ