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Just What Is the REAL Exposure to Greece? Pt 1
The financial world is awash with theories as to how significant the Second Greek Bailout is. I’m far less concerned with this (the Bailout accomplishes nothing of import and only puts off the coming Greek default by a short period). Instead, I think it much more important to ascertain the true exposure to Greek sovereign debt.
And what better place to start than the banking system of the one country that is playing hardball with Greece during this latest round of negotiations: Germany.
First off, the reports concerning German bank exposure to Greek debt are anything but reliable. For instance, according to the Bank of International Settlements German bank exposure to Greece is only $3.9 billion (though they state this is only on an immediate borrower basis).
This is a bit odd as according to The Guardian German banks have nearly 8 billion Euros’ worth of exposure to Greek debt. And they only include 11 German banks in their analysis. However, of those 11 banks, THREE of them have Greek exposure equal to more than 10% of their total outstanding equity.
Source: Guardian datablog
Let’s consider Commerzbank as an example. Let’s say Greece defaults and creditors get 20 cent on the dollar (this is likely wishful thinking). This means Commerzbank now faces 2.3 billion Euros’ worth of write-downs on its Greek holdings… which means it’s wiped out 21% of its entire equity… which pushes its leverage levels through the roof and most likely renders it totally insolvent (there is no way Greece is the only toxic junk this bank owns).
Mind you, I’m just doing back of the envelope analysis here. But this might explain the following story:
Berlin May Have to Nationalize Giant Commerzbank
… If Commerzbank CEO Martin Blessing could make one wish, he would presumably ask for a few billion euros, or that someone would take the bank's ailing subsidiary Eurohypo off his hands, or that the entire sovereign debt crisis would simply disappear.
But banks, along with their managers and owners, are not allowed to pin their hopes on miracles. They need money, as quickly as possible. And since Commerzbank's survival is at stake once again, the major shareholder in Berlin is thinking the unthinkable: One-quarter of Germany's second-largest financial institution already belongs to the state; now the government is considering fully nationalizing the bank if necessary.
http://www.spiegel.de/international/business/0,1518,801827,00.html
So… based on this brief analysis right off the bat we know the following:
- The Bank of International Settlements is either completely clueless about the risks posed to the financial system by PIIGS’ debt OR intentionally downplays those risks (neither is good).
- The Guardian’s datablog (which obtains all of its data from publicly accessible records) somehow comes up with numbers that are dramatically different (and higher) from those published by the Bank of International Settlements.
In my next article, I’ll show how even The Guardian’s numbers are far too small. But suffice to say, it’s clear right off the bat that the Greece situation is a much bigger deal than most investors realize. Indeed, if the Greece debt restructuring does trigger a credit event, we could very well see a Crisis that makes 2008 look like a joke.
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Sorry to spoil the fun but Commerzbank just announced that its Greek sovereign bond portfolio has been marked down to approximately 26% of its nominal value.
https://www.commerzbank.de/en/hauptnavigation/presse/pressemitteilungen/...
AHHH ! And he was just getting wound up too ! I like the proprietary crash indicator; it's successfully predicted 13 out of the last 3 crashes. The nine page (9 !) pamphlet that explains, exactly, what's going to happen sounds great too. If he's so good at predicting things, why does he have to sell his newsletter to pay the rent? Sigh. Always the same old logical problem.
As with the EU and the eurobanks and Greece, as with Iran and Israel and the on-again, off-again nuclear weapons, as with Wall Street and the endless rounds of bailouts/bake sales, there is the establishment trying to solve real problems with endless volumes of bullshit.
It's not hard to determine the amount of Greek debt: what was LTRO 1 and what is the upper limit of LTRO 2? One and a half trillion euros all together? How much of that belongs to 'other' EU countries? Not much b/c ECB debt taken on subordinates all the other outstanding debt. Figure 200 billion euros for other countries' debt leaves well over 1.2 trillion euros of Greek debt. No wonder the banks don't want to talk about it b/c it is a damned scary-ass number!
Once the financiers realize that 1.2 trillion euros cannot be extracted from the Greek paupers, they will all head to Frankfurt and demand the Germans pay them or else. Or else what? The hapless Germans have exactly the same control over external creditors AS DO THE GREEKS, which is the outcome of the same stupid monetary/fiscal system designed for ALL THE EUROZONE COUNTRIES INCLUDING GERMANY.
Meanwhile, if the Israelis are going to spit on the Iranians' faces they better do it fast b/c the rest of the world will be too broke to do anything to bail them out. Another week of HIGH OIL PRICES caused by the Israeli desire to suck their own collective penis will do the trick. Down with the waste-based economy is also down with Israeli version.
That the Israelis or the Americans can prosecute some/any sort of successful war against the #3 world energy producer without fatal consequences is the most bullshitty of all possible bullshit.
Iran doesn't have to close the Straits of Hormuz, they simply have to fire some rockets at the Saudi, Kuwaiti and Iraqi terminals across the Persian Gulf. They cut off their own oil and harass some tankers and no shipper will be able to gain maritime insurance. Game Over! Not much damage, no ships actually sunk but nobody risking $3 billion tankers to find out how much a sinking actually costs.
It's game over anyway: Saudi oil production now appears to be in terminal decline. Try bullshitting your way around that one, Obama et cie.
When are the folks in charge going to cut the bullshit as a strategy and start doing their jobs? First step is to literally cut the bullshit, cut the endless and pointless waste.
At some point the waste problem solves itself. We are getting very near that point, and it isn't going to be pleasant.
Good grief!
"could very well see a Crisis that makes 2008 look like a joke"
No further jokes necessary... the entire present economic environment is a joke.
The joke is on us and the pranksters are the banksters.
If a POS country like Greece can take down the financial system, WE DESERVE IT.
I'm afraid I have to agree. Nobody is really minding their own money, meaning minding the goings on of their banks. And why's that? The FDIC has their back. We leaned nothing from the grandparents. I presume our grandkids (assuming they live through this w/o starvation taking them down) will learn nothing from us.
what do you mean "we" ?
this is a banker-politician man-made problem.. they ordered shit, they eat shit
Put a Taxpayer Holiday to the vote, Iceland got one
By "we" I mean everybody.
The bankster/fraudster politicians have convinced everyone it is doomsday if Greece isn't bailed out, which was just a FUCKING EXCUSE to put more money in the bankers pockets.
Let the default happen and then let the real fun begin.
fun has begun in Greece and it aint "fun"...If we pull the plug the fun will spread but it will end eventually; after much bloodshed.
Those who say, wait and see, think the implosion of ponzi will cause less pain; both ways the fun won't be fun. That's for sure.