The Greek Butterfly Effect

Tyler Durden's picture

Submitted by Northman Trader

The Greek Butterfly Effect

Many times nothing happens for a long time. Then all of a sudden everything happens at once. Like a dam break. It builds slowly and then it bursts. Example: Who would have ever thought the Confederate flag would be taken down across the South during the same week that a rainbow flag is symbolically hoisted across the entire country? Just because things seem unthinkable doesn’t mean they won’t happen.

Take the global debt construct as another example. For decades the world has immersed itself in ever higher debt. The general attitude has been one of indifference. Oh well, it just goes higher. Doesn’t really impact me or so the complacent rationalize.

When the financial crisis brought the world to the brink of financial collapse the solution was based on a single principle:

Make the math workable.

In the US the 4 principle “solutions” to make the math workable were to:

1. End mark to market which had the basic effect of allowing institutions to work with fictitious balance sheets and claim financial viability.

2. Engage in unprecedented fiscal deficits to grow the economy. To this day the US, and the world for that matter, runs deficits. Every single year. The result: Global GDP has been, and continues to be overstated as a certain percentage of growth remains debt financed and not purely organically driven.

3. QE, to flush the system with artificial liquidity, the classic printing press to create demand out of thin air.

4. ZIRP. Generally ZIRP has been sold to the public as an incentive program to stimulate lending and thereby generate wage growth & inflation. While it could be argued it had some success in certain areas such as housing, the larger evidence suggests that ZIRP is not about growth at all.

If ZIRP’s true goal were to stimulate growth the result of this:


…would not have produced this:


No, ZIRP’s true purpose is actually much more sinister:

To make global debt serviceable. To make the math work without a default.

Here’s the reality: If we had “normalized” rates tomorrow the entire financial system would collapse under the weight of the math. In short: Default.

Which brings us to Greece the butterfly, the truth and indeed the future:

Greece for all its structural faults is the most prominent victim of fictitious numbers. From the original Goldman Sachs deal to get them into the EU based on fantasy numbers and to numerous bail-outs, the simple truth has always been the same: The math doesn’t work.

It never has and it never will until there is a default on at least some of the debt.

And in this context the Greek government’s move to call for a public referendum on July 5 may be a very clever strategic move as it forces the issue of math.

Here’s the strategic frame-up:

Ultimately what Greece needs is debt relief. Big time debt relief to make the math work.

The global cabal of creditors, ECB, EU, and IMF do not want that.

Why not? Because the very second they do this the classroom will look like this:


Everybody would want a cut on their debt starting with Italy, Spain, Portugal etc. and the dominos would be rolling.

No, they do not want this as a default would require acknowledging that debt matters.

What are the alternatives?

Greece’s referendum move risks putting a debt deal up for a vote to citizens. When has that ever happened? Have Americans every voted on their government’s debt spree? Have citizens ever had a say on their central bank’s policies and balance sheet expansions? The answer is no. This so ever important element of our global economic system is completely removed from voters.

And so Yanis Varoufakis is very much correct in highlighting this open secret:

No, voters are very much not permitted to participate in this decision making process. And hence the only reason a Greek referendum may actually proceed is this: To make an example of Greece. You want to default? Watch what we will do to Greece.

But that’s a big gamble for the EU, for the ECB, the IMF and everybody else including China and the US.

Why? Because all of them have carefully orchestrated a construct that they do no want to see disturbed. It’s not an accident that we have seen 46+ rate cuts this year. It’s not an accident that China announced another rate cut just a day after Chinese stocks plummeted 7% this past Friday. It was no accident that the Fed’s Bullard talked about QE4 in October the moment US stocks got close to a 10% correction.

No, you see their primary mission in their timed actions and their words: To make the math work. And to continue to make the math work.

And hence Janet Yellen is not delaying rate hikes because she is “data dependent”. She is dealing in reality: Over $18 trillion in US debt (and ever growing) a large portion of which needs to be refinanced over the next 5 years. And higher rates will become an ever larger burden on the discretionary budget of the US. And the world, heavily indebted that it is, has the same problem:


So this next week is not so much about Greece the butterfly, but it is about keeping the butterfly from becoming a hindrance to the math working globally. And the Greek government knows this. They are negotiating on the basis that a bad Greek deal from Europe’s point of view is better than a default. Angela Merkel wanted a concluded Greek deal before markets open on Monday. Now she has a mess.

And in the world of gamesmanship every percentage drop in the #DAX will enhance Greece’s negotiation stance.

This past week saw a massive rally in the #DAX in the hopes that a deal would certainly be positively concluded. Now this weekend all this bullish sentiment may find itself tested come Sunday night and Monday morning unless Europe blinks quickly. China is doing its part to support the construct with this latest rate cut, but the ECB can’t be happy about its QE program challenged by the constant Greece distraction:

As we outlined in technical charts a default of Greece would risk a structural repeat of 2011:

And it couldn’t come at a worse time:

No, odds are they’re not going to let Greece default. They can’t afford to. The math has to work.

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CHC's picture
CHC (not verified) Jun 27, 2015 8:38 PM

Ah yes Lotus Blossom, the old Greek Butterfly effect. 

THX 1178's picture

"The math has to work."

The math of a ponzi scheme cannot ever work just by definition. 

Little Doll's picture

My last pay check was $9500 working 12 hours a week online. My sisters friend has been averaging 15k for months now and she works about 20 hours a week. I can't believe how easy it was once I tried it out. This is what I do...

Bumpo's picture

Perhaps Greece should make the above proposal to the Troika. Imagine, $9500 working 12 hours a week online for every man, woman and child in Greece ... Tsipras needs to meet your sisters friend!

NoDebt's picture

As was stated so eloquently by another poster on ZH today:  Math is racist.

I really don't know what you say after that, but I think he might be on to something.  

Anusocracy's picture

Screw the Greek Butterfly Effect.

They need the Greek Rodan Effect.

Fish Gone Bad's picture

Anything you can destroy... you can control. 

AlaricBalth's picture

"It was my understanding that there would be no math..."
Chevy Chase SNL 1976

Supernova Born's picture

Globalism: all the world's eggs in one basket.

Oh regional Indian's picture

The only things greeks need to know about Butterflies is that they are free to away from the EU....

Rusty Shorts's picture
The Awakening of Talos - "Jason and the Argonauts; 1963"
WOAR's picture

Now THAT was a good movie...

PartysOver's picture

No worries, be happy.  Common Core Math will handle it.

acommenter's picture

Where do I sign in ? Hell, I would spam every forum in the world for 950$, for 9500$ I would go door to door to every forum user!

fromthinair's picture
fromthinair (not verified) Little Doll Jun 27, 2015 10:38 PM

Hi Little Doll,

I hitch-hike zerohedge too, but for entirely different reasons (so that you do't have to do that). You should consider some other real job than to fool people into something surreal. Moreover, thiese kind of tricks are the reason why people come here to get some real new. Follow your fiduciary duty.

I understand that earning a livelyhood is a difficult thing.. but do it graciously. Please do not be offended.

dreadnaught's picture

if this REALLY works, why on earth are you selling the secret to everyone?

Unless you method does not work and you instead, make your money by SELLING guilible people 'the secret'

Clever!  You rip people off!



ps. I guess it dont matter because neither of your pages open-i get a 404

Bilderberg Member's picture

Is this about a math problem or a negotiation or political control?....The answer is political control.

conscious being's picture

BilderMan I had to login to applaud your cogent critique. I'm downvoting this op. His basic premise is, Is there an avenue for manulation by the Central Planning Bureaucracy? Its like the bankster troll, responding to the news that Woodrow Wilson caved in to bankster demands because they were blackmailing Woody over pedophilia, saying "Yes, wasn't that a brilliant accomplishment?"!!

My take is Greece is leaving based on the fact that this major diversion just kicked off.


Fish Gone Bad's picture

When bad things are planned to happen, a lot of bad things will happen all at once.  Perhaps this will be the week everyone saw coming (in one way or another), for the last 5 years or so.

disabledvet's picture

Pedhaps not only foresaw but actively tried to "Victoria Nuland and the Russian Gambit turning into an outright provocation turning into a full scale war between Russia and Europe."

Not that that has ever happened before of course...

Took Red Pill's picture

Yes things seem to be coming to a head. Greece, Russia & Europe, confrontations with China, and now ISIS attack. Seems US is gearing up to go into Syria and this latest attack will be the excuse (or they'll be a bigger attack from ISIS to justify it).

"Pretext ISIS: US Poured Billions Into “Moderates” Who Don’t Exist"

grekko's picture

Greece isn't big enough for SHTF.  Heck, the Fed could paper over that one easy.  Two months worth of QE?  This may be the flipping point though.  Look for things slowly turning down until September at least.  Then, watch out below because it's gametime.  Jade Helm ends in the middle of September (9/15/2015).  In military parlance, first you train for it, then you do it.  Why else would they be pre-positioning heavy duty US military troops and equipment, UN trucks, foriegn troops, Homeland Security heavy vehicles all over the country?  We'll also see Q3 give us a recession.  possible bond bubble burst.  Then there's the Shemitah (9/13/2015), a really bad end to a 7 year cycle of economic malady complete with blood moons.  FEMA holiday camps staffing up and rumors of guillotines.   2.2 billion hollow point rounds purchased by Homeland Sec, enough to shoot every citizen 5 times in the back of the head (ammo outlawed by the UN for use in war).  Social Security and Park Rangers being armed.  Walmarts becoming either military supply depots or possibly processing centers for the politically uncorrect.  I could probably go on and on, but I think that you all get it.  This year ain't gonna end like it started, so buckle up ZH'ers, we're going for a ride!

I know that a lot of people here are non-believers, but even the bible has something to add:

"I saw thrones on which were seated those who had been given authority to judge. And I saw the souls of those who had been beheaded because of their testimony about Jesus and because of the word of God. They had not worshiped the beast or its image and had not received its mark on their foreheads or their hands." 

Are they refering to being "chipped" after the fall?

Took Red Pill's picture

I was not familiar with Shemitah and looked this up.

 This coming September 13, 2015, marks the end of the Shemitah. It is a time of abundance in the Land of Israel, but a traditional time of economic catastrophe in the USA.

The word Shemitah refers to Sabbath year observed in ancient Israel, when all working of the land ceased, the land rested. This took place every seventh year. On the last day of that year, all debts were wiped away, all credit was nullified, the financial accounts of the nation were, in effect, wiped clean.

Let's see what happened at the termination of previous Shemitta years, the end of the seven-year cycle in the Hebrew calendar:

2008: Stock market collapse, mortgage crisis, bank collapse - Sept. 29

2001: Stock market collapse, 9/11 attack - Sept. 11

1994: Bond collapse - more than $1 trillion loss to bondholders

1987: Black Monday, stock market crash, October 19

We can go back even further and mention the 1980 Silver panic and stock market crash, the 1973 oil embargo when oil prices quadrupled and more, and the 1966 stock market collapse.


Let’s see what happens this September.

bitterwolf's picture

Parasite folk who are ugly as fuck....Rome should have sown salt as they did to Carthage.

jonjon831983's picture

Oh are you referring to: 

Green Day - Wake Me Up When September Ends

palmereldritch's picture

It's only a 'debt' if they can collect.

disabledvet's picture

Indeed...and as China realizes that they in fact will never be repaid for their "European Adventure" they are in fact LOWERING interest rates.

This will not come as a surprise to either the Spanish or English of course.

gatorengineer's picture

You are missing the whole point with Mark to unicorn it doesn't matter if it is collectable

Gambit's picture

True, they will let Greece go.  Greece defaulting gives them the excuse they need, an event to blame the crash on.  Structurally all economies are in the toilet, financial engineering has masked that in the past 5 to 7 years.  However, now even that is not working and economic indicators are weakening fast.   Hence, the perfect excuse Greece!


To all those Cali haters, the number of out of state cars in California has been steadily increasing, where in the past I would only see 1 or 2 a week. Now it’s 3 to 4 a day. People are moving here to try to look for work.  Next week is going to be exciting, Puerto Rico will most likely default on Wednesday as well. 

SoCalBusted's picture

Those out of state cars are rentals driven by tourists.  Look at all the houses on the market selling above asking price.  Look at the home building going on in the IE.  Smells like 2007 to me.

grekko's picture

Why go to Cali?  HAARP is drying the place out.  Whoever is giving the order is in league with Lucifer.

economessed's picture

"Making math work" is like saying 2+2 = 5 for very large values of 2.


Reality tends to really suck the fun out of fantasy, eh?

grekko's picture

With Mark to Unicorn, anything is possible, until it doesn't.

BullyBearish's picture

And THIS from the BIS:

BIS: Low rates holding back global growth

  • Ultra-low interest rates are holding back global growth and fueling financial instability, the Bank for International Settlements warned in its annual report, urging central banks to move more swiftly towards normalizing monetary policy.
  • Rather than simply reflecting widespread economic weaknesses, ultra-low rates have contributed to the slow recovery in the global economy by entrenching the excessive reliance on debt and causing large-scale misallocation of capital.

SoCalBusted's picture

"Let the voters decide" is a false choice.  All of the financial engineering that took place had no voter input.  Now that the "experts" have fucked everything up the voters get to choose how much shit they will have to take in the collapse regardless of the vote outcome.

grekko's picture

Without chaos, the elite cannot have order out of chaos.  This is just another mile down Fury Road.

yrad's picture

I don't buy it...

yrad's picture

This guy acts like there is a solution. His solution? Lower rates, keep printing, kill the butterfly. Ponzi schemes have no solution, only a shelf life.

WTFUD's picture

Agreed yrad. I guessed that's what you meant but in this day and age Nothing can or should be taken at face value. ( Ha Ha ).

You might agree with my post below this with me crying out for blood on the streets. Be nice to watch these Parasites getting out of Dodge.

somecallmetimmah's picture

Time for another really great war, started in the Balkans, as usual?

samjam7's picture

Balkans won't do anymore for how messed things are, unfortunately.

BarkingCat's picture

Why as usual?
WWI can be attributed to there, but what else?

cossack55's picture

Alleged ethnic cleansing allowing Clinton and NATO to bomb Serbia as they were a little too friendly with the Russians.

Not to mention the whole Alexander the Great thingy and numerous Ottoman Empire and Russian Empire problems.

holdbuysell's picture

The only question is who will win the lottery in the derivatives market this time?

ThroxxOfVron's picture

"The only question is who will win the lottery in the derivatives market this time? "


I don't know who is going to win but I'm pretty sure the US Citizenry are going to lose again..


Put all my money on Red, -er, I mean Goldman.