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Greece Tumbles Into The Deflationary Abyss, While Its Primary Surplus Sounds The "Grexit" Alarm

Tyler Durden's picture





 

While the second-derivative hopers and primary budget surplus believers cling to the faith that Stournaras talking about recovery is enough to bring the depressing Greek nation out of its slumber, the fact is that Greek deflation has never been worse. However, it gets worse... as a recent study by CFR finds that countries are most at risk of defaulting the year they turn a positive primary budget - meaning they are no longer reliant on their creditors. Simply put, the Greek government has far less incentive to pay, and far more negotiating leverage with, its creditors once it no longer needs to borrow from them to keep the country running - this makes it more likely, rather than less, that Greece will default sometime next year. Beggars, once again, become choosers.

 

Less worse un-growth and Hope deflating...

 

Via CFR,

Things are looking up in Greece – that’s what Greek ministers have been telling the world of late, pointing to the substantial and rapidly improving primary budget surplus the country is generating.  Yet the country’s creditors should beware of Greeks bearing surpluses.

 

A primary budget surplus is a surplus of revenue over expenditure which ignores interest payments due on outstanding debt.  Its relevance is that the government can fund the country’s ongoing expenditure without needing to borrow more money; the need for borrowing arises only from the need to pay interest to holders of existing debt.  But the Greek government has far less incentive to pay, and far more negotiating leverage with, its creditors once it no longer needs to borrow from them to keep the country running.

 

 

 

This makes it more likely, rather than less, that Greece will default sometime next year.  As today’s Geo-Graphic shows, countries that have been in similar positions have done precisely this – defaulted just as their primary balance turned positive.

 

The upshot is that 2014 is shaping up to be a contentious one for Greece and its official-sector lenders, who are now Greece’s primary creditors.  If so, yields on other stressed Eurozone country bonds (Portugal, Cyprus, Spain, and Italy) will bear the brunt of the collateral damage.

 


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Mon, 12/09/2013 - 13:13 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Deflation is a myth as no society/currency has collapsed/died because their purchasing power became too strong.  So I guess that the greek people will have no problem buying gas to keep them warm this winter, good for them.

Roll the guillotines, nothing changes otherwise...

 

Mon, 12/09/2013 - 13:30 | Link to Comment Variance Doc
Variance Doc's picture

Absolutly correct.

What you are seeing is a consequence of deleveraging.  The world is producing real assets at a decreasing rate, while the paper is exponentially increasing (debt + coupon).  Hence the printing.

Mon, 12/09/2013 - 13:55 | Link to Comment Enslavethechild...
EnslavethechildrenforBen's picture

Believing in Santa Clause is more rational than believing that deflation could ever actually happen. End the Fed. Force the Treasury to print money interest-free and give it to the poorest of the poor. Let it trickle up to the corrupt %*€} suckers at the top for a change.

Mon, 12/09/2013 - 15:23 | Link to Comment Peter Pan
Peter Pan's picture

Amazing. Laws of Physics gets 27 up votes for the deflation angle and you get 5 upvotes for the inflation angle but no down votes.

Talk to the people eperiencing the so called deflation to see that there isn't any.

So you're right. It is far easier to blieve in Santa Claus than in deflation.

Mon, 12/09/2013 - 15:27 | Link to Comment TruthInSunshine
TruthInSunshine's picture

The Greek citizenry is crying out in agony as they see the prices of good & services crash all around them, and as their purchasing power to acquire such goods & services SOARS!!!

The misery!

Defeat Deflation Now!

Viva la Revolución!!!

 

/total sarc

Mon, 12/09/2013 - 20:50 | Link to Comment espirit
espirit's picture

Deflationista's Theorem:

"Buy Gold in Greece".

(it's gotta be what? ... like $200 oz?)

Mon, 12/09/2013 - 13:34 | Link to Comment TalkToLind
TalkToLind's picture

It would suck if I went to the grocery store and milk, beef and baby formula had a lower price than before.  Give us MOAR QE!  I want LOAR rates for my savings!

Mon, 12/09/2013 - 13:39 | Link to Comment somecallmetimmah
somecallmetimmah's picture

That'd be nice.  Except that the crack-head you invited to live in your house stole all your euros, and now your daughter is knocked-up with a crack-head grandchild that you're going to get to raise.

Thanks, european union!

Mon, 12/09/2013 - 15:11 | Link to Comment Papasmurf
Papasmurf's picture

Deflation is a myth as no society/currency has collapsed/died because their purchasing power became too strong

Deflation moves wealth away from banks to the poor and middle classes.  That's why bankers are in a crisis and transfering the country's assets onto their balance sheet as quckly and quietly as they can through QE.  They are looting the country.  In Greece, they collapsed the economy and then moved in to loot national treasures.  They have started the process in the rest of Europe and the USA.

Mon, 12/09/2013 - 15:09 | Link to Comment Peter Pan
Peter Pan's picture

Laws of Physics, With due repect to all those who up voted you, I must say I dsagree.

Greeks are actually experiencing a perverted form of inflation in the sense that falls in personal income are outstripping deflationary tendencies.

They won't be buying heating oil this winter as you state because even those with some cash are getting scared that the economy is still shrinking after 5 years of EU medication.

If you spoke to people on the ground in Greece you would understand what I am saying.

Mon, 12/09/2013 - 15:43 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Not very good with sarcasm are you?  Any blue collar person who's labor is of real value understands what you and I are saying.  We didn't mis-allocate or mal-invest all this capital and resources (pointless wars and BAILOUTS).  The bankers and other paper-pushers did, yet they became wealthy and everyone else will be made to suffer.

Let me clear, roll the motherfucking guillotines, nothing changes otherwise.

Mon, 12/09/2013 - 15:43 | Link to Comment Joe A
Joe A's picture

Well actually the other day a girl died of carbon monoxide poisoning because their house was cut off from electricity and they that to resort to warm their apartment using a stove which was faulty.

Mon, 12/09/2013 - 13:13 | Link to Comment Capitalist
Capitalist's picture

What happens to Deutsche Bank if Geece says FUCK YOU MALAKA!?

http://youtu.be/Zvl9N9GdraQ

Mon, 12/09/2013 - 13:17 | Link to Comment Rory_Breaker
Rory_Breaker's picture

They get bailout/bailin?

Mon, 12/09/2013 - 13:58 | Link to Comment wallstreetapost...
wallstreetaposteriori's picture

Nothing since they haven't been marking to market those interst rate derivatives.

Mon, 12/09/2013 - 13:23 | Link to Comment Dr. Engali
Dr. Engali's picture

The bankers better create a crisis to get the Greeks deficit spending again. We don't want anybody getting any crazy ideas like they can survive without the banker scum.

Mon, 12/09/2013 - 13:24 | Link to Comment Grande Tetons
Grande Tetons's picture

If only they still had the Drachma....they could be pulling an Abe. Ahhhhh...what could have been. 

Mon, 12/09/2013 - 14:43 | Link to Comment daveO
daveO's picture

And, we're supposed to believe that the Ukraine wants to join EU? 

Mon, 12/09/2013 - 14:50 | Link to Comment czardas
czardas's picture

I keep hoping that Greece will fix their foreign property laws but things are more screwed up than ever with folks claiming this and that and making sales next to impossible.  We almost bought a Greek island (tiny with a nice home) reduced 82% (the demand was cash in DOLLARS - LOL) but at the last minute were warned of "possible" ownership problems.  Then we heard from a "middleman" who offered himself as proxy for the sale (for a nice fee, of course).  Greece has literally thousands of useless islands and empty properties but things are so FU than I doubt things will ever be peacefully resolved

Mon, 12/09/2013 - 15:44 | Link to Comment LawsofPhysics
LawsofPhysics's picture

All eCONomies are really local at the end of the day, and even the greek locals know that when fraud is the status quo, possession is the "law".

Mon, 12/09/2013 - 13:17 | Link to Comment dcohen
dcohen's picture

Crisis' are over, Central Bankers have learned that you do it soon enough, long enough and hard enough, until they can't any longer. Greece is just a drop in the ocean, the shadowy men had a goal, to put technochrats at the throne. There was no crisis as it was portrayed in the media, it was a bunch of renegades forcing the elected out, replaced by bankers. Deflation, inflation, who cares, they will just do it until hell breaks loose. Fukuyama's end of the world includes end of economies. Greece will never default, or put in another way, Greece is already in a default state, it defaulted long ago. This is the age of the Central Bankers, and there is nothing anyone of US can do about it. Revolution is an oppurtunity, but you would have to convince Kim Kardashian to mobilize the people for that.

Mon, 12/09/2013 - 15:07 | Link to Comment czardas
czardas's picture

I agree.  I almost feel like, "OK, this is not going down anytime soon.  Central banks will keep pulling and pushing, adjusting and altering to make it all work." There will be no upheaval, no revolution, no radical change, just a slow decline until we resemble early China with emperors and the masses.  I am counting on technology to make the difference.I am counting on technology to make the difference.

Welcome to the past.   Greece never defaulted / Greece is in default / Greece will never default - the chilling essense of doublethink (1984),

Mon, 12/09/2013 - 13:18 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

You know what?  At first glance this is a good point.  If you run a surplus excluding interest, then REALLY exclude interest.

Except this is not that world, so at second glance, maybe not.  Everyone buys stuff on short term credit.  Shut off Greek credit because of the default and their imports shut off.

aka oil.

Mon, 12/09/2013 - 13:24 | Link to Comment NoDebt
NoDebt's picture

Don't second guess yourself so much.  Once you clear away the old debt your balance sheet looks much different IMMEDIATELY AND FOR THE BETTER.  Aside from everyone whose figers you burned by defaulting, you're suddenly an awesome-looking credit risk.  Yeah, it'll take the bankers a few years to get over being burnt, but they'll lend to them again.

And if you're running a suprlus.... you can pay for the oil.  

Pretty amazing what you can do when you get out of debt.  Not that I have any personal experience with going debt-free or anything like that.  ;)

Mon, 12/09/2013 - 13:43 | Link to Comment Dewey Cheatum Howe
Dewey Cheatum Howe's picture

More importantly Greece and Cyprus have a large untapped amount of gas/oil reserves offshore everyone wants a piece of. Israel and Russia are curently the 2 biggest contenders as knights in white shining armor to finance and help put in the infrastructure to get them generating real revenue. Getting out of debt is one thing but having stuff everyone else NEEDS changes the strategy. The Greeks can technically stiff everyone on the debt and get away with it because of that as long as they give the people they stiffed first cracks at buying that stuff without needing a third party to protect them.

Mon, 12/09/2013 - 13:56 | Link to Comment Enslavethechild...
EnslavethechildrenforBen's picture

Replace the petrodollar with the solarpaneldollar

Mon, 12/09/2013 - 15:26 | Link to Comment Peter Pan
Peter Pan's picture

They have known about that oil since about 1970.

It is going to be quite a while before that oil surfaces and even longer before Greece gets its hands on it.

Mon, 12/09/2013 - 16:24 | Link to Comment Dewey Cheatum Howe
Dewey Cheatum Howe's picture

Russia has money, means and know how to get at it fairly quickly. The Greeks need to tell the EU and Euro to go fuck themselves and you can bet Russia will be right there to help out.

Mon, 12/09/2013 - 16:46 | Link to Comment edotabin
edotabin's picture

They tried to approach Norway about it.  They received a letter "strongly suggesting" otherwise.

 

 

 

 

Mon, 12/09/2013 - 19:42 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

Russia is the largest oil producer in the world and are scarfing in $112/barrel Brent (and higher) every single fucking day for the 10.5 million barrels they pump out each day.  They would have to make a call on if that extra alleged flow would cut the price on the rest of their output.

But beyond that, there are gargantuan oil fields all over the planet, if you believe every wildcat lease owner who wants to sell that lease.  It's usually a pretty good idea to suspect there's nothing there if so very many people have decided not to grab those untold riches.

 

Mon, 12/09/2013 - 19:45 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

BTW you might want to consider that there is no international bankruptcy court to expunge that debt.  A Greek declaration of default doesn't have to be accepted by the creditors.  The EU and IMF can just keep compounding, and confiscating any asset that leaves Greek territory.

Mon, 12/09/2013 - 13:29 | Link to Comment CounterPartyVice
CounterPartyVice's picture

We just need these bonds to get low enough for your friends in the GS alumni to get in and profit from the latest troika "deal". Remember, it's for the people.

Mon, 12/09/2013 - 13:43 | Link to Comment somecallmetimmah
somecallmetimmah's picture

"Remember, it's for the people."

 

'Zactly.  Not your people.  The people who matter.

Mon, 12/09/2013 - 13:27 | Link to Comment CounterPartyVice
CounterPartyVice's picture

.

Mon, 12/09/2013 - 13:19 | Link to Comment 1000yrdstare
1000yrdstare's picture

Thanks ZH....if I did not have you I would not know the world is falling apart around me.....

 

no sarc!!!

Mon, 12/09/2013 - 13:23 | Link to Comment ZH Snob
ZH Snob's picture

my mother told me a long time ago that when you owe money it is really the problem of the lender and not the borrower.

Mon, 12/09/2013 - 13:44 | Link to Comment somecallmetimmah
somecallmetimmah's picture

Where is she now?

Mon, 12/09/2013 - 14:09 | Link to Comment ZH Snob
ZH Snob's picture

in debtor's prison, I think.

Mon, 12/09/2013 - 13:54 | Link to Comment annabelleballow
Mon, 12/09/2013 - 13:24 | Link to Comment magnetic_silver...
magnetic_silver_ideas's picture

Well, this madness has to get worse before it gets better. It's a total breakdown of the system.

Bullish for gold? Bearing for olive oil? - Probably.

Mon, 12/09/2013 - 13:23 | Link to Comment starman
starman's picture

2014 - the year of defaults. woo hoo!

Mon, 12/09/2013 - 13:25 | Link to Comment q99x2
q99x2's picture

I've been in trauma for over 4 years as to whether or not Greece is going to default. You can only take it for so long before you have to screem. Did you here that?

Mon, 12/09/2013 - 13:57 | Link to Comment Enslavethechild...
EnslavethechildrenforBen's picture

Technically speaking, a prison labor death camp can never default

Mon, 12/09/2013 - 13:25 | Link to Comment Teddy Tenpole
Teddy Tenpole's picture

 

 

 

Note to self, it's the experience of austerity following the debt binge where people finally say, fuck you to the Joo Bankers.  So take 2015 and work it backwards to see the wealth being drained out of the country by those same cunts...

It looks like the USD for gold trade should begin in 2014.  Interesting to therefore note that the Chinese have jumped the trade.  I guess there wasn't any room for Obama's war in the master plan.  I wonder when the Saudis are going to jump this trade?

Japan is the Treasury patsy so are they showing signs of desperation?

 

Once again, great food-for-thought provided here on ZH.

 

 

Peace Out Douches

Mon, 12/09/2013 - 13:38 | Link to Comment insanelysane
insanelysane's picture

Not so fast.  Saw and article that says Japan v China in January for a little war action.  I don't see North Korea missing out on the action either.

Mon, 12/09/2013 - 13:45 | Link to Comment Winston Churchill
Winston Churchill's picture

Its very hard to know how much gold the Arabs are buying on their own account.

I heard a rumor a while back that the Saudis asked for the return of their gold from the NYFed.

Tht was before Syria.I wonder if they got the same bums rush as the Germans ?

Mon, 12/09/2013 - 13:36 | Link to Comment dick cheneys ghost
dick cheneys ghost's picture

looks like the chinks are embracing Xmas and spending like crazy........poor bastards

http://www.dailymail.co.uk/news/article-2520753/Chinese-boyfriend-jumped...

Mon, 12/09/2013 - 13:38 | Link to Comment Van Halen
Van Halen's picture

Slovenia appears to be in trouble now. Might want to keep an eye on this one.

Mon, 12/09/2013 - 15:29 | Link to Comment Ponzi Pontiff
Ponzi Pontiff's picture

“You heard it here first; the next is Slovenia,” says Farage during one of his speeches onstage, “Slovenia will be bailed out within the next two to three months.” - Nigel Farage, May 2013 (http://www.prweb.com/releases/2013/5/prweb10681392.htm).

I keep forgetting, is being early worse than being wrong?

Mon, 12/09/2013 - 13:48 | Link to Comment lolmao500
lolmao500's picture

Deflation is GOOD. Fuck all Keynesians.

Mon, 12/09/2013 - 14:00 | Link to Comment Enslavethechild...
EnslavethechildrenforBen's picture

There is no such thing as deflation until the Military arrests the Bankers. But since they are one and the same, that will never happen.

Mon, 12/09/2013 - 13:51 | Link to Comment bugs_
bugs_'s picture

so many exciting phrases

"deflationary monster"

"deflationary abyss"

keynesians are such negative nancies

Mon, 12/09/2013 - 14:49 | Link to Comment daveO
daveO's picture

Banker's Nightmares. As in, 'Jamie, did you see another deflationary monster under your bed?'

Mon, 12/09/2013 - 14:08 | Link to Comment youngman
youngman's picture

Greece is back in the news...good..I like it

Mon, 12/09/2013 - 15:27 | Link to Comment Peter Pan
Peter Pan's picture

You may like it but just remember that no news is good news.

Greece still hasn't hit bottom. Don't forget that.

Mon, 12/09/2013 - 17:33 | Link to Comment Non Passaran
Non Passaran's picture

That's exactly why we like it!

Mon, 12/09/2013 - 16:25 | Link to Comment TalkToLind
TalkToLind's picture

The Greeks I feel the most sorry for are those who took their wealth out of the banking system prior to deflation and those who bought precious metals prior to deflation.  I can't imagine the suffering felt when one's purchasing power grows exponentially without warning.

Mon, 12/09/2013 - 19:42 | Link to Comment shovelhead
shovelhead's picture

If the Greeks ever get organized enough to audit the books, I'm sure they will find enough quid pro quos in these 'loans' to declare them odious debt that they aren't required to pay back by their lapdog political parties and the WB, IMF and other sundry criminal enterprises.

They could just pull an Ecuador and tell them 'fuck off, we ain't paying'.

Worked for Bush over Saddam's debt in Iraq too.

It would be a long time before they could borrow again but in Greece's case this would be a good thing.

Mon, 12/09/2013 - 21:18 | Link to Comment Notarocketscientist
Notarocketscientist's picture

These are MUST READS - you can work out what the collapse looks like from reading this

 

http://ourfiniteworld.com/2013/12/06/diminishing-returns-energy-return-on-energy-invested-and-collapse/#more-3863

http://ourfiniteworld.com/2013/10/14/two-views-of-our-current-economic-and-energy-crisis/

Do NOT follow this link or you will be banned from the site!