This page has been archived and commenting is disabled.
Greece And Euroland's Crumbling McMansion Of Debt
Submitted by Charles Hugh-Smith of OfTwoMinds blog,
All the gimmicks lenders press on borrowers to maintain the artifice that the loan is being serviced are financial frauds.
Sometimes the best way to summarize a complex situation is with an analogy. The Greek debt crisis, for example, is very much like the subprime mortgage crisis of 2007-08.
As you might recall, service workers earning $25,000 annually got $500,000 mortgages to buy McMansions in subprime's go-go days. The applicant fudged a bit here and there on income and creditworthiness, and lenders reaping huge profits from originating and selling mortgages were delighted to ignore prudent underwriting standards and stamp "low-risk" on the mortgage because it was quickly sold to credulous investors.
The bank made its money in transaction and origination fees, and passed the risk of default on to investors who accepted the fraud that the loan was low-risk.
The loan was fundamentally imprudent and risky because the borrower was not qualified for a loan of such magnitude. But since the risk was distributed to others, the banks ignored the 100% probability of eventual default and skimmed the profits upfront.
Greece was the subprime borrower, and its membership in the euro gave the banks permission to enter the credit rating of Germany on Greece's loan application. Though anyone with the slightest knowledge of Greece's economy knew it did not qualify for loans of such magnitude, lenders were happy to offer the loans at interest rates close to those of Greece's northern neighbors, and then sell them as low-risk sovereign debt investments.
In effect, the banks were free-riding the magical-thinking belief that membership in the euro transformed risky borrowers into creditworthy borrowers.
It's as if the $25,000/year worker wrote in a rich cousin's sterling credit score on his mortgage application. The lender and applicant conspired to fudge the numbers to lower the apparent risk of the loan. In the case of Greece, Greece and the lenders each fudged the numbers; there was no real penalty for doing so, and the rewards for doing so were substantial.
Marginal borrowers eventually default, and sure enough, both the subprime borrower and Greece soon defaulted. Life isn't perfect; people lose their jobs, get divorced, have medical emergencies, etc., and recessions lower GDP and national income.
Prudent lenders make allowances for these risks. But lenders who make big money originating loans and offloading them to others have no incentive to be prudent; rather, they have every incentive to make as many loans as they can, as quickly as they can, to maximize their profits.
Faced with massive writedowns, the lender has two choices: it can loan the defaulting borrower more money, with the explicit guarantee that the borrower will use the money to pay interest on the original mortgage. The total loan amount goes up, but the loan stays on the books at full value.
Or the lender can roll the mortgage into a lower-interest loan, effectively entering partial forbearance: the promised return on the mortgage plummets, but as long as the borrower makes small monthly payments, the loan stays on the books at full value.
Both of these strategies have been deployed in Japan for decades to keep impaired debts on the books at full value.
The last choice is to turn the mortgage into a zombie loan: the loan is neither written off nor listed as being in default: it enters a zombie state, not in good standing but not in default, either. The mortgage can stay in this netherworld for years, as the lender waits for the market to rise enough that the house can be sold without the lender absorbing a huge loss on the mortgage.
Unfortunately for buyers of sovereign debt, there is no house that can be sold to pay down the debt. Lenders can demand the debtor-nation sell off its assets to make good on the loans, but there is little recourse should the debtor-nation refuse.
When the borrower can barely make the monthly payment, he becomes a zombie. The loan principal barely budges, and so the future is unending penury. The borrower can cut expenses--bike to work, only eat beans and rice, only buy thrift-store clothing, etc.,--but this austerity doesn't change anything: he still can't afford the loan.
This is why austerity is a fake solution: no matter what the guy earning $25,000 a year does, he will never be able to pay down the $500,000 mortgage.
Meanwhile, the poorly constructed McMansion is falling apart. The loan didn't boost the borrower's productivity, or create a new income stream; the borrowed money was squandered on something that did nothing for the borrower that something much, much cheaper could have done just as effectively.
What did Greece get for its $300+ billion in debt? Did it transform the lives of all citizens for the better, fix all its dysfunctional systems, and build an economy for the 21st century? No; the borrowed money simply masked the dysfunctional systems and allowed the Status Quo kleptocracy to reap fortunes.
Greece's lenders want to keep the imprudently issued loans on the books at full value.They followed the strategy of loaning Greece more money, but only to make the interest payments. Now there is fevered talk of some version of partial forbearance: rolling the debt into new loans, perhaps writing off a chunk of the debt, etc.
None of this changes the fundamental fact that Greece was unqualified to borrow that much money. No matter what the guy earning $25,000 a year does, he will never be able to service the $500,000 debt in a way that frees him from zombie servitude to the lender.
So the hapless subprime borrower with the crumbling McMansion and Greece both have the same choice: decades of zombie servitude to pay for the crumbling structure, or default and move on with their lives.
All the gimmicks lenders press on borrowers to maintain the artifice that the loan is being serviced are financial frauds. They are simply new frauds piled on the initial fraud of issuing a visibly imprudent loan. The borrower was not creditworthy and the lender should never have offered him loans of that magnitude and at that low interest rate. The losses belong to the lenders, period.
»
- 15772 reads
- Printer-friendly version
- Send to friend
- advertisements -
The McMansion on Krugman Bullovard
He is one squirelly son of a bitch.
So you're saying my minimum wage job at McDonald's doesn't ENTITLE me to a McMansion? Racist bastard.
Anyone else notice how often the word "deserve" shows up on commercials and so on? It seem that we have a whole generation of people who "deserve" things: good houses, healthcare, retirement security, etc.... What the hell did these people do to deserve all this?
"So the hapless subprime borrower with the crumbling McMansion and Greece both have the same choice: decades of zombie servitude to pay for the crumbling structure, or default and move on with their lives."
Even this is misleading. It doesn't matter if they take decades. Even with decades, it is fundamentally impossible that the debt can be repaid. Time makes no difference in this equation. The Greeks do not have the productive capacity to repay the loan, and never will have that capacity (assuming no alien ship lands from Alpha Centauri with magic extra-terrestrial technology... in Athens...). There is no choice! The loan is dead. I wish the Europeans would just wake up to this. It's really tiresome watching them beat their heads against this simple reality. Bloody morons. And these are our "leaders"?
Funny thing about debt-fueled demand, eventually you run out of future to consume.
You mean you run out of other people's futures...
Both Germans and Greeks are running out of people domestically, with unrecoverable slumps in demographic curves. Germans were depending on lending money to foreigners to buy their goods, and thereby make German pensions viable. But they are lending to countries in demographic collapse. German pensions will take a huge haircut.
So now what, my hair is on fire and the tomato plants are inside what more can i do?
I hope it burns to the ground. The flags, the EU, the EMZ, everything except the ECB's new building, which should be signed over to the Bundesbank to offset a fraction of a percentage of Target2 imbalances it is going to eat.
The Burning Building With No Exits will burn faster and hotter.
Best quote I've read: "The Deutschemark is overvalued relative to the French franc and there's nothing Draghi can do about it"
" default and move on with their lives."
Pull the chain - faster please!
Agenda 21 will fix all that. See, the oligarchs always have solutions to the problems they create.
oppss... give the germans their two minutes of fame ... schauble thinks he is running the world ... right on
the "financial services" industry is supposed to exist to facilatet capital investment with new and improved infrastructure so a country can function more efifciently.
the politicians-worldwide-have done nothing but conspire with bankers to render their citizens enslaved to the financial services industry.
Watch: A new independent, short documentary about the impact of the deadly austerity in Greece
More info get you more clicky:
What eliminates a society and what makes it stronger?
A documentary based on the unexpected but not random meeting with David Stuckler, Professor of Sociology, Oxford University, known for his thorough studies of the consequences of austerity in people’s health.
A walkthrough in history during crisis.
From the USA in Great Depression, to post communistic Russia and from there to Greece and Iceland of today. Financial wars, humanitarian crisis, deadly politics and people who fight.
This documentary is a product of teamwork of the Social Solidarity Network and citizens of Iraklion, Crete. All of us, the participants, were rewarded with the bliss and plenitude that derive from the “alongside” work for our common values.
www.youtube.com/watch?v=BleTZriYI90
same link
This entire concept can be applied to the recent IMF loan to Ukraine which makes Greece's financial prospects look sound and secure by comparison.
TruthDig video: "Has the IMF Annexed Ukraine?" Michael Hudson explains...
Posted on Feb 14, 2015
Michael Hudson, an economist at the University of Missouri-Kansas City and author of the upcoming book “Killing the Host: Financial Parasites and Wall Street’s War on Capitalism,” says the terms attached to the loans made by the IMF to Ukraine are likely to turn its people into penniless serfs of international banks.
In the video above, Sharmini Peries at The Real News Network asks Hudson, “In a recent interview [by former State Department official James Carden] published in The National Interest magazine you said that most media covers Russia as if it is the greatest threat to Ukraine. History suggests that the IMF may be far more dangerous. What did you mean by that?”
Hudson responds, “Well, the terms on which the IMF make loans, first of all, are based on austerity. The terms require more austerity and a withdrawal of all public subsidies. Now, you have the Ukrainian population absolutely devastated. The only result of the IMF’s austerity program, the conditions that it’s laying down for making loans to Ukraine, is you have to repay the debts, but you don’t have the ability to repay the debts. So there’s only one way to do it, and that’s the way that we’ve told Greece and other countries to do. You have to begin selling off whatever you have left of your public domain. Or you have to have your leading oligarchs take on partnerships with American or European investors so that they can buy out into the monopolies in the Ukraine.
“So essentially, the IMF has a two stage, one-two punch. Punch number one is: ‘Here’s the money, now you have to repay us after cutting back public spending and causing a depression.’ The two punch is: ‘Oh, you can’t pay us? I’m sorry that all of our projections are wrong.’
“And the IMF has been wrong on Ukraine year after year. Almost as much as it’s been wrong on Ireland and on Greece. So now the real problem is: what is Ukraine going to have to sell to pay off the foreign debts that it gets for having waged a war that’s devastated an economy. Well, the main things that foreign investors want are Ukrainian farmland. Monsanto has been buying into Ukraine, but Ukraine has a law against alienating its farmland and agricultural land to foreigners. As a matter of fact, its law is very much the same as what the Financial Times reports that Australia is wanting to do today: to block Chinese and American purchases of farmlands. The IMF’s position is: ‘You have to dismantle public regulations against foreign investment and you have to dismantle consumer production and environmental production regulations.’
“In other words, what is in store for Ukraine is a neoliberal policy that’s guaranteed to actually make it even worse. And in that sense, finance is war. Finance is a new kind of warfare using finance and forced selloffs in the IMF as a new kind of battlefield. I’m not sure how all of this is going to really help Ukraine, and it promises to lead to yet another crisis down the road, very, very quickly.”
—Posted by Alexander Reed Kelly.
Again, JR, your comment demonstrates that those are often more worthwhile to read through than to read the original article under which that comment was posted. I feel it is entirely on topic to consider the lengths that the international banksters are able and willing to go in order to maintain the established systems of ENFORCED FRAUDS, in order to put the current Greek predicament into proper perspective!
During the American Civil War, President Lincoln was reported to have said that he had two enemies, and that the bankers behind him were the most dangerous of those two. That certainly applies to the Ukrainian situation, as well as the Greek, because that applies almost EVERYWHERE! Therefore, I tend to despise the ways that Hugh-Smith presented his opinions above, due to the degree that he remained INSIDE THE BANKSTERS' BULLSHIT.
THAT "MONEY" BEING "BORROWED" WAS DONE THROUGH LEGALIZED COUNTERFEITING!
Of course, the people who have the legal power to "lend" that MAD Money-As-Debt, which did not exist until it was "borrowed" have every incentive to do so as much as possible, since they immediately get to take home a slice of that newly made "money" for nothing. The article by Hugh-Smith above was typical of the kinds of superficial stuff that he routinely gets republished on Zero Hedge.
Ironically, since our total political economy is so totally dominated and built upon the ENFORCED FRAUDS of the international banksters, to be "practical" is to continue to operate within those banksters' bullshit world view, when it comes to discussing loans and repayment, whether that is by individuals, corporations or countries. However, in my view Michael Hudson is also another reactionary revolutionary. I have watched lots of his presentations, and he is typical of those who present the facts quite well, but then collapse back to bullshit "solutions," because they do not penetrate into the deeper levels of how and why those became the real social facts.
One of the reasons for that are when one penetrates deeper into how and why the actual social facts exist, one also penetrates deeper into the biological and physical facts, and that becomes even more distressing and disturbing than the social facts already were! Civilization is conrolled by ENFORCED FRAUDS. Money made out of nothing as debts have been paying to strip-mine the planet's natural resources in order to build "McMansions" in ways which were mostly squandering those resources.
As a previous article by Hugh-Smith correctly pointed out:
http://www.zerohedge.com/news/2015-02-11/small-grexit-dominoes-global-crises-grow
From Small 'Grexit' Dominoes, Global Crises Grow
A significant Greek default could start a chain reaction of larger and larger domines falling, within the overall context of sovereign bonds, etc., as outlined many times in various Zero Hedge articles, e.g.:
http://www.zerohedge.com/news/2015-01-19/beginning-end-100-trillion-bond-bubble
The Beginning of the End of the $100 TRILLION Bond Bubble
I have previously posted many comments where I complain that the authors of varoius articles republished on Zero Hedge rely too much on presumptions based on Hanlon's Razor. Although Michael Hudson is not quite as as bad in that regard as others, he still continues to basically be a reactionary revolutionary, who rejects rather than embraces that the BASICS are that all private property is based on backing up claims with coercions, in which context money is measurement backed by murder.
The article you linked, JR, has the title "Bretton Woods: The Real Threat to Ukraine's Sovereignty?" There is no doubt that is CORRECT, however, that continues to indulge in the relatively superficial view of "sovereignty." Sovereign states were created by the history of the surviving War Kings, through military success, which was basically the application of the principles and methods of organized crime on larger and larger scales.
"Sovereignty" is based on the power to rob, with the power to kill as the most extreme form of the power to rob, which backs up all of the other powers to rob through systems of legalized lies, backed by legalized violence. In that context, the international bankers became the best organized criminals, or biggest gangsters, the banksters, that were able to apply the methods of organized crime to the political processes in order to capture control over governments, and thereby effectively privatize the power to rob (taxation) through the develop of systems wherein privately controlled banks were legally allowed to make the public "money" supply out of nothing as debts, which frauds the governments enforced, and in which context the national central banks were the National Kings of Fraud, while the Bank of International Settlements became the King of Kings of Frauds.
THE ESTABLISHED POLITICAL ECONOMY OPERATES THROUGH THAT KIND OF NEW ROYALITY, IN THE COURTS OF THE FRAUD KINGS.
Both Greece and the Ukraine, as well as everywhere else, have their own historical paths of ending up inside of those globalized systems of ENFORCED FRAUDS. However, firstly, most people deliberately ignore that history, because there is no practical point in them paying attention, because that is like a fish noticing the water. Secondly, the few that do notice tend to still continue to promote the bullies' bullshit world view, based on DUALITIES, or false fundamental dichotomies and the related impossible ideals, as the source of the bogus "solutions" to that situation.
There is no practical political point to my attempts to explain more radical truths, because almost nobody is interested in a veiw that provides no actionable intelligence inside of the established systems ... I am well aware of that most people do not want to face the facts that the entire economy is based on ENFORCED FRAUDS, while the few that do continue to not want to face the facts that IT MUST BE.
(As an aside, in the 1960s, when the mass media first began to talk about the "hippies," those people were referred to as the "fringies." I have continued that trend, to become the fringe of the fringe of the fringe. I promote the Fringe Cubed perspective upon the political economy, which is based on more systematic radical truths.)
Excellent comments guys. Looking deeper, I suspect that Austerity and it's trappings are just cover for dealing with a world that is slowing down. By definition and strong causality, less inputs results in less outputs, and that results in a delta change with a minus sign for many people. At the top, it's better for them to have something like national irresponsibility to blame for the austerity, when in fact, the austerity was likely baked in by the current conditions and the decades of pre-conditioning. Humanity wanted things to go fast and to play and create and recreate. Over the decades, that approach sowed the seeds of the current slow down. BDI anyone?
Radical: I can agree with much, if not all, of what you write ... as being the proper analysis of how things are and how they got to be that way. But I still struggle to see what you are proposing as an alternative.
For example, the property I own I bought through the fruits of my labor. The person I bought it from acquired it through the fruits of his labor. And this goes way back.
The property my parents bought was "defended" by abstract, not by mortgage insurance. So reading that abstract document you are able to trace ownership all the way back to the "beginning" ... i.e. the supposed beginning. That property being in Illinois, the beginning was with a grant of land by Andrew Johnson to a soldier on the Union side in the civil war ... to the winners go the spoils. Interestingly, that soldier only owned the land for about a day and sold it for $50 ... my parent's parcel being just a tiny part of the original parcel that soldier was given.
But the abstract didn't go back farther than that. The aboriginal tribe in the area was the Peoria tribe. Perhaps they were the people who had rights to the land before it was claimed by the USSA. Someone (some tribe? ... a collection of bears and lions ... something claimed that land and defended it before the Peoria tribe ... and someone else before that).
What are we to do?
A right is "a defended claim". I have a claim on my land and it's defended by our system of property registration and mortgage insurance. MERS has screwed much of that up for most people's property so it's pretty much impossible now to defend any new claim to land purchased by mortgage.
What are we to do?
What would you do?
Possession is 9/10ths of the law, both in written laws and the law of nature. Protect and possess in accordance with those laws as best you can.
+1 for a very nice succint answer.
Tell that to the IRS.
You pay mortgage insurance to protect the lender against your default, i.e. you don't have the magic 20% down payment and are instead financing 95 -100% of the purchase price of the property. Title insurance defends your right to a claim on your land against any subsequent claims that may not be recorded within the public records. But you are correct in that MERS has usurped the legitimacy of basic state/county recording laws. Bankers don't like to pay recording fees if they don't have to, and it's an added bonus when it allows them to foreclose on you because was MERS was merely a nominee for your mortgage and they never actually possessed the original note or security instrument. These obligations were bought and sold as soon or before the ink was dry, which leads us to securitization...
I meant to write "title insurance", not mortgage insurance. I have never paid mortgage insurance since I got my foothold before mortgage insurance became a financing requirement for first time buyers. It's hard to believe (actually impossible) the so-called capitalist financiers need all this risk protection when they are expecting (and getting) purchasers to pay for their purchase 3 times ... and most purchasers complete their trading promise as agreed.
And MERS is "not" about recording fees. The legal costs in drafting the "boiler plate" papers swamps the fee for filing the papers with the county clerk's office. Rather, it's an efficiency (like title insurance is an efficiency) that was very poorly implemented.
withglee, any alternatives are stictly palliative.
Unfortunately, aka_ces, I have to agree with you that "alternatives" to an already terminally sick and insane society ARE "strictly palliative."
withglee stated that the founding of the USA could be wholesale robbery of the natives because "to the winners go the spoils ..."The majority of people lived their little lives INSIDE the established systems, mostly by working hard and obeying the law. That the law itself was de facto legalized lies, backed by legalized violence, did not directly concern them. Their personal successes were achieved INSIDE those systems.
withglee likes to promote one of the idealized versions of what money should be, which is that it ought to operate as a Medium Of Exchange. I have often pointed out previously that, if one looks deeper into history, any idealized private property claim, and any idealized form of money, tracks back to the history of warfare. Since the ordinary individuals cannot legally create money out of nothing, they have a hard time comprehending the meaning of the social facts that private banks can. People who live as the productive prey of other people who are the predatory parasites have a morality which is suitable to them living successfully as members of those groups who were the productive prey. Of course, they tend to promote the idealized "solutions" of political problems that everyone else should adopt the moralities of the productive prey. However, the predatory parasites do not do that, although they publicly pretend that they do.
Our civilization is fundamentally based upon being able to back up lies with violence. That has been amplified by science and technology to become runaway systems of globalized electronic "money" made out of nothing as debts, which frauds are enforced by governments that have atomic bombs and other weapons of mass destruction. That is why I assert that Greece has ALREADY gotten into the predicament of DEBT INSANITIES, which are mathematically impossible for it to ever repay. However, if Greece defaults, then that could trigger dominoes of other defaults, and eventual bankruptcies of the biggest banks, which have been INSANELY leveraged on the basis of sovereign bonds, etc.!
The established systems of ENFORCED FRAUDS are like a terminal illness, like a totally metastasized cancer, or a parasite that is killing its host. There are no treatments that can save us, since any possible treatment that was effective would also kill us. The only possible alternatives in that context are merely palliative.
Despite all of the various idealized views of what money should be, I maintain that money IS measurement backed by murder, and so, the runaway debt insanities are going to provoke death insanities ... maybe something will survive through that, but it is hard to guess whatever that may be, or what kind of shape it would be in then!
At present, the only thing we can do is continue to muddle through the madness of a political economy based on ENFORCED FRAUDS, which are reaching the limits of their ability to continue to grow exponentially, while there is nothing within those established systems which has enough structural mechanisms to stop that monetary system from continuing to be like a metastasized cancer. Hence, I must agree that the only available treatments for the degree to which our society is terminally sick and insane is some palliative care ...
Meanwhile, the "ideal" that I propose is that we should develop a radically different set of concepts about death controls, in order to have better death controls, which could then back up better debt controls. However, that is practically nothing but promoting political science fiction or fantasy ...
RM, same basic ideas, different phrasing -- Genetic variation and the reproductive success of sociopaths assures a sociopathic presence so long as humans reproduce. Any 'good,' 'well-meaning' morality, e.g. one that advocates 'sound money' as a 'solution,' when adopted by large numbers of people, makes it so much easier for the small minority of sociopaths to subvert the high degree of trust that such morality requires and assumes. Time working thru generations of genes, and advances in technology, have increased the concentration of sociopath power, with a reach that is intercontinental and transoceanic, facilitating universal surveillance, control, and the ability to deliver just about any payload anywhere, including the nuclear. Yes, there is at least some pleasure in analyzing, interpeting, and communicating, regardless of the implications of the message.
YES,
aka:
"same basic ideas,
different phrasing"
Now that we have you two in agreement, what do you propose? Can the two of you live together in harmony?
RM: Assuming neither of us are murderers nor are the people we "prefer" to associate with, and assuming all money is backed by murder, then we must get along without money ... right? And we must get along without debt, right?
Do you have a proposal on how to do that?
Try this thought experiment: You, and I, and the collection of people we want to associate with, (and without the people we know better than to associate with) ... we're somehow planted on a large, productive, uninhabited island. Now what?
Since you've failed to responded to this inquiry before, I shouldn't expect a response here. Thus, I choose not to be on your island. I choose to be on a different island where we "know" what money is (a promise to complete a trade) and we "know" what debt is (a promise to complete a trade) and we know both are socially beneficial and require no force. We "know" neither are bad. We know it is "default" that is bad. We know default is the exception that can afflict any of us through no fault of our own. We know default can be the modus operandi of the weak amongst us and they will be ostracized in the marketplace. We know "interest collection" is the antidote for default.
In a short time my island will prosper. Your island not only "will not" prosper ... you and your friends will die off of exposure and starvation.
Meanwhile, the "ideal" that I propose is that we should develop a radically different set of concepts about death controls, in order to have better death controls, which could then back up better debt controls. However, that is practically nothing but promoting political science fiction or fantasy ...
Propose away RM. I'm listening! Remember. Any of us can take ourselves out of the game any time we want (and I don't recommend a nail gun because no one is going to believe that).
The idea of loaning money to Ukraine makes me want to cry. Why are we so hell-bent on destroying ourselves as a species? The personal insecurities and angst of the leaders of modern states are ensuring that they take billions with them as they suicide themselves.
Acchh nine, zedefranz, nine!
F(E)UBAR
https://www.youtube.com/watch?v=fPWU8hy0McY
Frauds, bitchez
Ahhh, but there is a solution -- NIRP. Negative interest makes the loan balance go down over time. Of course, everyone else's deposit balances and asset values go down even faster, but that is a minor quibble. The ECB should refinance Greece at a negative rate. NIRP will set Greece free!!!
Frikkin' brilliant. Geese, the model already exists - just do it!
"The losses belong to the lenders, period."
TBTF dictates that the losses belong to governments, period.
No. the losses belong to the taxpayers.
Duly corrected.
If the institution is TBTF, it's To Big To Exist
"The Fed's balance sheet is a pile of tinder..."
Alan Greenspan
But BATFE needs to ban M855 before we throw the match on. Because when SHTF you don't want bullets with green tips coming at you. The horror!!!
The good citizens of Greece deserve U.S. income tax refunds like the good Mexican citizens.
And the right to vote themselves more money.
...."and so the future is unending penury" .... .... "This is why austerity is a fake solution" .....
Let them eat cake rice and beans ...
Hey Dragi what did you do with Italys' gold? Inquiring minds want to know.
"Lenders can demand the debtor-nation sell off its assets to make good on the loans, but there is little recourse should the debtor-nation refuse"
This is when NATO enter the scene.
Except Greece is in NATO. Which makes this situation even more retarded.
Unus pro omnibus, omnes pro uno
What Are Words Worth
Sorry, I meant the real Nato not the cleaning lady.
As in the American subprime crisis and the implosion of the American International Group, financial derivatives played a role in the run-up of Greek debt. Instruments developed by Goldman Sachs, JPMorgan Chase and a wide range of other banks enabled politicians to mask additional borrowing in Greece, Italy and possibly elsewhere.
In dozens of deals across the Continent, banks provided cash upfront in return for government payments in the future, with those liabilities then left off the books...
http://www.nytimes.com/2010/02/14/business/global/14debt.html?pagewanted...
I hear Greece will settle this debt by paying with olives and feta.
The borrower can declare himself bankrupt and never repay the loan.
Extend and pretend is alive and well in the USA.
Financial repression takes many forms and each form acts as a multiplier upon the other.
Ignore the percentages of homes that are 'underwater' for a moment and look closerly at the delinquency rates:
http://www.zillow.com/visuals/negative-equity/#7/40.872/-74.366
In the community in which I live -Paramus, New Jersey- the delinquency rate is 12%. 1 out of every 8 'homeowners' is not paying their mortgage and property taxes, and very often isn't paying home owner's insurance either.
In many surrounding areas of New Jersey and New York and Pennsylvania the delinquency rates are much much higher. Some parts of north-eastern New Jersey and metro NYC have delinquency rates of 30%, 40%, and even higher!
I personally know of a direct competitor for the services I provide who has not paid his mortgage, property taxes or home owner's insurance since Q2 of 2008. The banks has not received over $325,000 in due/over-due payments in the period in queston. BTW: this sum is more money than it would take for me to pay off the entirety of my own mortgage including both the entire outstanding principal and all of the interest that would accrue for full duration!
This guy is sitting in a home with a near million dollar mortgage outstanding. The bank cannot foreclose on him and many many more like him that are underwater because it would instantly crash the local market and crystalize many billions of dollars in losses rendering them unquestionably deeply insolvent...
The servicer has either been forwarding payments or holds the note and has extended forbearance the entire time, has also made all of the property tax payments to keep the municipality from taking the property to auction, and has also made all of the home owner's insurance payments so that the possible re-sale value is protected from catastrophe.
There is no way I can compete with this guy on price since he effectively has NO housing expenses. He undercuts anything I try to do. The clients love his prices and don't care how he manages to provide the services at what I continue to argue is un-economic and below market insanity.
Exacerbating the problem of attmpting to compete with this guy is the fact that he has recently reached the age when he can collect Social Security and receive medicare; and he is now getting a check delivered to his free-to-live-in McMansion every month!
Some of Us have been very prudent and hard working and are simply being starved out by these free riders that have nothing to lose.
Ultimately it is the US government that is allowing if not encouraging this to be prolonged by the banks -because it doesn't want to nationalize the lot including the TBTF, and in the same stroke destroy not only them but the insurance funds, pension funds, hedge funds, the state tax basis and municipal taxes basis for all of the affected communities...
The truth is: there is/would be nowhere for millions of families to move to if/when these properties are finally foreclosed upon. Not that this whould matter as a course of solving the problems without socializing the pain unto rational actors and prudent hard-working entrepreneurs that did not make such mistakes and engage in such obscene levels of leverage...
In the mean time honest, prudent actors are being literally starved out of the economy and into poverty; collateral damage from the housing crash and ideologically constrained/expedient economic/social/political policies...
The truth of the matter is that the USA is presently in a very similar position as is Europe/Greece...
Solve your problem in the Jersey way - burn his house down.
Yeah, I thought those Jersey guys were tough.
The additional little twist to the whole mess is that local municipalites are in league with the bankers -in that foreclosure collapse their real estate tax base-which then trashes out their ability to service their bonds.
Does mean tho-that local citizens might under some circustances may very well have legitimate cases for a property tax court on the basis their assessments are much higher than "mark to reality" real estate values would permit
If such crimes of inequity are indeed true Throxx - you should launch several and persistent media campaigns to reveal this story to the masses. Relentlessly go public until you are heard and the matter resolved.
" The bank cannot foreclose on him and many many more like him that are underwater because it would instantly crash the local market and crystalize many billions of dollars in losses rendering them unquestionably deeply insolvent"
Indeed, such a trap to be in. Bankers fucking nightmare. And everyone in Real Estate tries hard to hide this situation and lure homeowners into paying the highest possible price for a home. When in fact, prices should be way lower than this manipulated market.
Good article, great illustration. So:
1. Declare bankruptcy, 2. Write down ALL external debt save the small recent issue to 0 (sorry banksters!), 3. Shore up financial assistance in initial turmoil with whomever can help, even Russia/China, 4. Work on removing corruption loopholes/tax evasion, 5. Must adhere to fiscally balanced budget, so go to the GOLD standard, 6. Have an ouzo and enjoy watching the EU suckers sweat it out, while you restart at debt/gdp = approximately 0.
I almost feel Greek !
Let's see; Goldman Sucks was largley responsible for perpetrating the Greek financial fraud (suprise, suprise, suprise) .... I bet Hank Paulsons fingerprints are all over this greek financial fraud.
Ponzi
Japan, EU, US, China - they all operate as Ponzi schemes
Charles almost has it. Those who sold the loans are criminals. They belong in prison. The contracts are null and void because they were fraudlent to begin with.
Wipe out the original originators of the loans, then put them away.
That is the fundamental truth of this.
pssst...Charles
" The losses belong to the lenders, period."
Dictionary definition:
In case you didn't know...no money was ever lent. All that happened is that a con trick was played on the "borrower" and a balance sheet recorded the fraud. The "borrower" wasnever "lent" any money.The Greek finance minister knows very well the problem is bankruptcy not liquidity.
Here he is a few years ago when he was free to talk openly:
https://www.youtube.com/watch?v=pwAClUrhrek
Brilliant Video. Max Kieser, though many call him names, is in fact a great source of open and free conversation about the real troubles going on. SOme people don't like Max, because he allowes the anti EU forces to speak freely. The truth is something the media and EU hate and fear with a passion. Their state media just lies and covers up, while Max lets the truth tellers speak their minds.
"Financial jihadis and market fundamentalists selectively reading what they want into the religion of capitalism while weilding weapons of mass financial destruction and improvised exploding derivatives."
Class dismissed.
Max Keiser is Max Keiser, but he does have some very interesting guests and also has a few good things to say himself.
Though Stacey normally gets to say the important bits.
"Greece was the subprime borrower, and its membership in the euro gave the banks permission to enter the credit rating of Germany on Greece's loan application"
This is so true! It runs to the absolute heart of the disasterous membership of Greece, a nation toally unqualified to join the EU under existing rules at the time.
This act of fraud was done with a wink by all parties. The EU was happy to close their eyes to the lie, in order to expand the EU in size. And Germany both knew the act was fraud, but eagerly looked forward to extending credit to Greeks for a binge of consumption on German exports. I clearly remember being in Greece before the 2008 world wide crash. Stores everywhere jammed with goods, I mean jammed! And people we buying, smiles were on the faces of happy people. Dozens of happy 50 year old retirees sat around and talked and laughed at street side cafes on a weekday afternoon. Housing was having a form of boom by Greek standards. But mostly I saw mass consumption going on. But look around, I mean look at Greece, looking for industrial and economic expansion, and I could not see it anywhere. Sort of like 2015 America. A version of consumption without welath creating underpinning of industrial and technological expansion.
I mean this was a FRAUD from day one. So banks should eat their losses, they knew their loans were not payable.
Spot on Jack. My best guess is that at that time, everybody involved in ClubMed assumed that a system of "transfer payments" would be introduced to countries like Greece/Spain/Portugal/Italy to fund their new-found source of wealth.
Too bad that Brussels and EU political elites in Northern EU member states failed to tell their citizenry about it, perhaps underestimating the sheer size of the potential problem and they wrongly thought they could slip it through unnoticed. As we see, the German citizenry have no intention of being the EU's paymaster to fund irresponsible and economically illiterate political elites in ClubMed. This is forcing Mutti/Brussels to indulge in ever more smoke & mirrors to prevent the whole charade from imploding.
The irony of the EU is that it is creating the very condition that its early advocates claimed it would prevent: polarisation of EU states and growing nationalism.
Why the hell is no one mentioning Papandreou?!! He and his Goldman ilk are the ACTUAL SIGNATORIES on the original NINJA loan and the subsequent refi's!
Look at the bottom of the damn contract!
It says "George Papandreou & partners!"
It doesn't say "signed by The Greek People, et al."
The nerve of that Malaka to not only show his face in Greece, but to actually run again!
Arrest him, try him, put his head in a box with copies of the NINJA loan, send it to Brussels, put out arrest warrants for the rest.
Anything short of that is just another dance.