Greece is Just the Tip of the Iceberg for the $100 Trillion Bond Bubble

Phoenix Capital Research's picture

Greece, as a country, represents 2% of Europe’s GDP.  The country lied in its financial to enter the EU. Since that time, it’s been officially bankrupt since 2010. 


The country has since gone through a series of “bailouts” and experienced a 25% collapse in GDP (roughly equivalent to what Argentina experienced in its 2001 implosion).


And yet, despite all the bailouts and claims that Greece was “fixed,” the country is set to default on some of its debt this Friday.


How on earth does this farce continue? How can Greece be broke FIVE years after it was first allegedly “fixed”?


The answer is very simple. Greece was never fixed. The Greek bailout was about getting money to German and French banks, many of which would go broke if Greece defaulted on its debts.


This story has been completely ignored in the media. But if you read between the lines, you will begin to understand what really happened during the previous Greek bailouts.




1)   Before the second Greek bailout, the ECB swapped out all of its Greek sovereign bonds for new bonds that would not take a haircut.

2)   Some 80% of the bailout money went to EU banks that were Greek bondholders, not the Greek economy.


Regarding #1, going into the second Greek bailout, the ECB had been allowing European nations and banks to dump sovereign bonds onto its balance sheet in exchange for cash. This occurred via two schemes called LTRO 1 and LTRO 2 which happened in December 2011 and February 2012 respectively. Collectively, these moves resulted in EU financial entities and nations dumping over €1 trillion in sovereign bonds onto the ECB’s balance sheet.


Quite a bit of this was Greek debt as everyone in Europe knew that Greece was totally bankrupt.


So, when the ECB swapped out its Greek bonds for new bonds that would not take a haircut during the second Greek bailout, the ECB was making sure that the Greek bonds on its balance sheet remained untouchable and as a result could still stand as high grade collateral for the banks that had lent them to the ECB.


So the ECB effectively allowed those banks that had dumped Greek sovereign bonds onto its balance sheet to avoid taking a loss… and not have to put up new collateral on their trade portfolios.


Which brings us to the other issue surrounding the second Greek bailout: the fact that 80% of the money went to EU banks that were Greek bondholders instead of the Greek economy.


Here again, the issue was about giving money to the banks that were using Greek bonds as collateral, to insure that they had enough capital on hand.


Piecing this together, it’s clear that the Greek situation actually had nothing to do with helping Greece. Forget about Greece’s debt issues, or protests, or even the political decisions… the real story was that the bailouts were all about insuring that the EU banks that were using Greek bonds as collateral were kept whole by any means possible.


Thus, the Greek situation is really all about one thing: the BOND BUBBLE… specifically the fact that sovereign bonds are posted as collateral for derivative trades by the big banks.


The ECB doesn’t care about Greece. If it did, this problem would have been resolved five years ago by simply kicking Greece out of the EU until it regained its financial footing.


And in fact, the whole issue is not even about Greece… the reality is that SPAIN, ITALY, and ultimately even FRANCE are in or approaching similar financial straits as Greece.


At that point you’re talking about well over $3 TRILLION in sovereign debt, which is likely posted as collateral on well over $100 trillion in derivatives trades


The ECB and every other Central Banker/ political leader in the EU knows that what happens with Greece will serve as the template for the much larger, unmanageable problems for Spain, Italy, and ultimately France down the road.


This is why the Greek debt crisis continues without end. The minute Greek bondholders have to take a REAL haircut, the wheels come off the EU.


That day is approaching. And it will change the investment landscape for the entire globe as the $100 trillion bond bubble finally blows up… triggering a chain-reaction in the $551 trillion derivatives market.


If you’ve yet to take action to prepare for the second round of the financial crisis, we offer a FREE investment report Financial Crisis "Round Two" Survival Guide that outlines easy, simple to follow strategies you can use to not only protect your portfolio from a market downturn, but actually produce profits.


You can pick up a FREE copy at:


Best Regards

Phoenix Capital Research



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TeethVillage88s's picture

Phoenix Capital did okay here.

I didn't have it straight in my head.

** So a Bailout for any PIIGS is really a corporate bailout for Banks unless a stupid government buys PIIGS Bonds. IMF/WB are just banks, Corporations.

** That is not to say PIIGS were not Targeted for Looting **

Bail-Outs are Corruption -

All bailouts benefit the corporations that were bad Capitalists.

Kapitalismus Totet oder Toten.

Capitalism where Corporations and Banks are Protected is probably an old Europe thing that just came to the USA in 2009. But it is not Capitalism.

It is Fascism, Inverted Totalitarianism, or Corporate Socialism.

Bailouts are for the Elites. Start a business you are a target of the Banks and Wall Street. You don't get a Bailout.

Bail-Outs are Corruption -

yogibear's picture

"Door Open, But For What?"

Open QE door #4. Then QE door #5... QE door #6....... QE door #20

shovelhead's picture

I wonder if the ECB will buy my losing lottery tickets?

Same thing, no?

yogibear's picture

"I wonder if the ECB will buy my losing lottery tickets?"

Only if your a member bankster.

Devon's picture

FFS can people differenciate between the EU and the Euro. For a start there are 28 members of the EU and iirc 19 in the EZ. 

Greece got GS to cook the books so they could get into the euro, but even those fucktards at the EU and ECB aren't that thick, but were willing for political reasons to turn a blind eye. 

Oh and this has been five years in the making and when maths and common sense say there should be a default and Greece leaves all of a sudden some voodoo economics comes along to keep them afloat. 

I'll believe it when I see it. Been waiting long enough.

JRobby's picture

If their hair is an inch long it is going to be stubble. .05" of stubble.

Long hats!

Thalamus's picture

What will the new world look like when everything blows?

Radical Marijuana's picture

Perhaps, Thalamus,

metaphorically like:

Exploding iceberg in Antarctica!

Danostrat's picture

Did Greece lie? When we repeat the idea that they lied, we let lenders off the hook, and foist the losses (because Greece lied) onto taxpayers. But the lenders clearly knew everything, as the link below proves (the link also shows Greece was below the eurozone threshold).


There is no doubt that Goldman Sachs’ deal with Greece was a completely legitimate transaction under Eurostat rules. Moreover, both Goldman Sachs and Greece’s public debt division are following a path well trodden by other European sovereigns and derivatives dealers. However, like many accounting-driven derivatives transactions, such deals are bound to create discomfort among those who like accounts to reflect economic reality. For example, the Greece-Goldman deal may be of interest to credit rating agency Standard & Poor’s, which upgraded Greece’s long-term debt from A to A+ in June 2003.

JRobby's picture

It is easy to rant "end Goldman" as many like to. But it is not reality. Goldman is a component of the larger banking cartel/oligarchy. That is where the wrath should be devoted.

shovelhead's picture

Goldy is pretty much the spikeholder and Morgan is the John Henry who built the Rip-em-off Railroad.

Who would have thought that selling paper would end up being far more profitable than selling goods around the globe and usurp the industrialists place at the head of the table?

That creating money from credit is a damn fine business to be in. When you win, you win and when you lose, the house gives you your money back.

I'd play that casino all day long and send out for sandwiches.

marathonman's picture

All well and good but at some point you have to adopt some Alinsky tactics to pick a target and concentrate the criticism at it to polarize it.  At least thats what I learned from Barack....

KnuckleDragger-X's picture

Almost all the EU countries stretched the truth, Greece just told outright porkies but they aren't the only ones who lied. Notice that the ECB covered their ass on the Greek debt but they are very exposed on countries like Spain and Italy and they know they can't bend them over like they did Greece. It looks like interesting times are coming to the EU.

Danostrat's picture

If by outright you mean legal scams by design, then I agree. The accountants told the Financial Ministers not to do it, and they said we will do what we want. And Greece was under the threshold so they didn't even need the scam. Legal though it was. Publicized though it was.


Which is my original point: is it a lie when it is legal, repeated, and publicized?

Radical Marijuana's picture

Danostrat, there is NO generally understood language to answer your question:

"is it a lie when it is legal, repeated, and publicized?"

Governments are NECESSARILY the biggest form of organized crime, controlled by the best organized gang of criminals, who are currently the biggest gangsters, the banksters. However, there is NO generally understood language to discuss that situation, because the public spaces are almost totally dominated by the biggest bullies' bullshit social stories. Moreover, the biggest bullies' bullshit world views are built into basic structure of the dominant natural languages and philosophy of science.

We are living in a Bizarro Mirror World, or Wonderland Matrix, where everything appears to be backward and absurd, due to the ways that the biggest and best organized gangs of criminals made and maintained governments, and the combined money/murder system, whereby the debt controls are backed by the death controls.

Goldman Sachs is one of those corporations that particularly specializes in having its people go through revolving doors to control governments. Behind the achievement of privately controlled banks being legally allowed to create the public "money" supply out of nothing, as debts, are thousands of years of the history of social pyramid systems based on being able to back up lies with violence, which became more sophisticated systems of legalized lies, backed by legalized violence.

It's Organized Crime, &

Controlled 'Opposition.'

Most of my work, for several decades, has been efforts to develop a use of the English language which could cope with those paradoxical problems that governments are the biggest forms of organized crime, controlled by the best organized gangs of criminals. My comments posted on Zero Hedge for the last couple of years have been expressing that, as I have regarding several earlier articles republished from Phoenix Capital on the topic of the sovereign bond bubble, e.g.:

The Beginning of the End of the $100 TRILLION Bond Bubble

The $100 Trillion Reason the Fed is Terrified of Deflation

Central Bankers' Worst Nightmares Are Unfolding in Greece

KnuckleDragger-X's picture

The difference between the EU countries and the Mafia books is the Mafia is much more honest.

Manthong's picture

What could possibly go wrong?