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Goldman: The Greek Solution "Exposes The Whole System To Collapse"
While not its base case (unlike JPM and Citi) Goldman Sachs was expecting an adverse outcome from this weekend's negotiations, and admits that this morning's pre-deal announcment "is thus a positive surprise, at least from a shorter-run, tactical perspective." So does is Goldman optimistic now on the outcome of the Greek deal for Europe and the prospects for further Eurozone utopia?
Hardly.
Echoing the harshly bitter sentiment of Wolfgang Munchau (and all non-Eurozone fanatics everywhere) who said that "The Eurozone As We Know It Is Destroyed", this is what Goldman has to say:
In our view, there are two main factors keeping investors sidelined. One is the residual implementation risks involved in the latest arrangements. Political hurdles in Greece and among those creditor countries most recalcitrant to offer concessions without guarantees will leave short-term investors unwilling to bear the volatility from headline news in relatively illiquid markets. The second, of much broader importance, is the accumulated evidence of the inadequacy of the Euro area's present fiscal governance, which takes up too many resources and exposes the whole system to collapse. Unless rectified by credible steps towards greater integration and ex ante risk-sharing, long-term investors seeking exposure to duration will shy away.
In other words, the only thing that could potentially "fix" Europe now, after an episode that may have terminally torn Europe apart following the stark juxtaposition in the "Grexit" reasoning "northern" vs "southern" countries, is closing the loop on Europe's federalization.
Unfortunately, if there is one thing Europe would be least willing to do now is hand over sovereignty to the ultimate decision-maker, which once and for all, was revealed to be Germany.
Unless of course, Germany continues steamrolling all other insolvent, peripheral nations with gradual annexations of national sovereignty as it has just done with Greece, which will be forced to hand over 25% of its GDP in the form of a liquidation escrow fund to Brussels/Berlin to do as it sees fit.
Here are the key sections from the just released Goldman note:
Looking aheadOn Friday we argued that the chances of Greece and its creditors coming to a fully comprehensive agreement over a new multi-year third programme over the weekend were low. Nevertheless, we expected that an accommodation of some form would be found to forestall the definitive 'Grexit' that had threatened. Overall (and recognising that, even if modest, procedural risks remain), the outcome announced this morning is thus a positive surprise, at least from a shorter-run, tactical perspective.
Yet looking ahead, the acrimonious process of reaching agreement has done little to re-establish trust among the various parties. Indeed, the opposite is likely the case. And frictions have emerged among the creditor countries (e.g. between France and Germany) over how to treat Greece and what implications that will have for the stability and resilience of the Euro area as a whole going forward.
With the economic situation in Greece deteriorating, substantial implementation risks to the new programme remain. Greek banks are likely to remain subject to controls for some time, even if -- as we expect -- the ECB Governing Council sustains the current level of emergency liquidity assistance while banks are restructured. Domestic political pressures against further adjustment and austerity will continue to mount. As we have seen in the past, the scope for the Greek authorities to backtrack from programme commitments once the financial support is flowing is high. After the events of the past few weeks, tolerance for such recidivism is likely to be extremely low. Greece will be kept on a short leash with invasive monitoring by the creditor institutions.
Greek membership of the Euro area over the longer term therefore remains in question. Even with a new programme, the substantial economic and political challenges facing the adjustments required to make Greece's fiscal, competitive and employment situation sustainable still need to be addressed. And despite measures in the new programme to boost investment, restoring growth to Greece remains a formidable challenge.
Yet the broader market is increasingly able to separate Greece from the rest of the Euro area. Particularly with regard to sovereign spreads, the impact of the recent Greek saga has been relatively modest, owing to some combination of: (a) expectations that a deal would be reached eventually; (b) the credibility of the ECB's backstops and willingness to do "whatever it takes"; and (c) the recognition that (now that direct private sector exposures to both Greek banks and sovereign have been reduced) Greece no longer poses the contagion threat it did in the past.
While Greece itself will remain in the news, we expect it will become less of a focus for broader market developments.
Market implications
The response in markets to the news of a 'deal', conditional on further 'prior actions' on the Greek side, has been tepid. This is broadly in line with what we wrote in our note last Friday, where we argued for the marathon negotiations to extend beyond the weekend.
In our view, there are two main factors keeping investors sidelined. One is the residual implementation risks involved in the latest arrangements. Political hurdles in Greece and among those creditor countries most recalcitrant to offer concessions without guarantees will leave short-term investors unwilling to bear the volatility from headline news in relatively illiquid markets. The second, of much broader importance, is the accumulated evidence of the inadequacy of the Euro area's present fiscal governance, which takes up too many resources and exposes the whole system to collapse. Unless rectified by credible steps towards greater integration and ex ante risk-sharing, long-term investors seeking exposure to duration will shy away.
We have used the 10-year government bond differential between the average of Italy/Spain and Germany as a gauge of intra-EMU sovereign risk. Our baseline economic forecasts, reinforced by the effects of QE, suggest that there is room for the spread to tighten below 100bp. In coming weeks, however, we continue to see the spread range-bound between 100 and 120bp.
In the near term, the main focus will be on the 'bridge financing' to avoid a default on the ECB on 20 July as this would compromise the chances of seeing a relaxation of the ELA. Then attention will shift to the treatment of the Greek banks, and the potential read-across to other resolution cases. On balance, we do not think that deposits and senior secured bond holders will be bailed in. Finally, attention will move to the terms of debt relief as discussion will take place as to whether they will be applied to other former program countries (our answer is, probably yes).
Should negotiations collapse -- a smaller probability outcome at this stage, but not a negligible one either -- we think that spreads would go to 200-250bp (i.e. 10yr yields back at 3perc) before the ECB intervenes to push them back down.
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even the CNBC capitulating this morning. josh brown asking jemma godfrey how can anyone be happy about anything. comedy hour. this extend & pretend strategy CAN AND WILL be allowed to go on until it can't. should have dealt with ALL the debt restructures back in 2007 when we had the chance but we papered over a debt bomb with a debt nuclear bomb. im sure it all turns out perfect. from $150 global debt in 2007 to north of $200 global debt now. no plan, just continuing to make it thru the next election cycle SO LONG AS stocks stay up.
politicians fear political instability. credit investors continue to pour $$$ into vehicles of "safe, fixed assets" until they wake-up 1 day and realize the principal is exposed when u lend to people who can't pay it back. in this case, the german tax payer (as well as other eurozone taxpayers) are the credit investors with the politicians acting as fund advisors. its the single most insane thing ive ever seen & allowed to happen. doing the same thing here in the states. im sure a 25% growth rate is right around the corner that will save us. uh-oh, check-that ... my calendar says 5 months 'til winters.
What? No glowing words from Douche Bank!?
Wonder why?
Next up - cede all national sovereignty as solution.
Communism in the end will rule....
http://galeinnes.blogspot.com/2015/07/the-3-profiteers.html
Its not Greece, its the debt base monetary system that by its nature must collapse. Greece is just a possible catalyst. But after is does fall apart will they admit its a failure and attempt to put in a sound monetary system. No, they will simply put another patch on it to continue the fraud, unless the people wake up and prevent it.
I doubt true, pure, communism will be attempted again .
Perhaps with Germany in the lead they can start another experiment in national socialism, in Greece.
Actually it is Totaliterianism that will rule in the end. communism is just the next step after socialism...
Tsipras has demonstrated that he is a sheep and a traitor, a coward selling out his people to a Germany that starts to resemble ever more of the third reich. Not in domestic politics - yet. But surely in the aggressive manner it subjugates the rest of Europe.
If Tsipras had any honor left, he would ask for a referendum NOW! But he won't. Rallying people behind himselfes only to betray them the next day. What a farce and a disgrace of a "leftist" politician. Varoufakis would have been the right man for the job. Tsipras is the biggest disappointment of the last 3 decades, for sure. They should kick him out of his Pm office the very moment he arrives there.
What for did the greek people bear the sacrifices of the past weeks and months - if Tsipras sold them out completely anyway? handing this banksterr-whore merkel a triumph that she never ever could have gotten without this Asshole Tsipras. She should give him a decent blow job once a week in return, at least.
I have a favor to ask of you and others on ZH. Can we all just please stop pretending that there are "good cops/bad cops" in this Greek drama. Tripiras is a socialist; his party supports socialism. Varoufakis is a member of that party. That means they support a demonstrably failed idealogy. The whole of Europe has very few politicians that could be considered supporters of the Austrian School of Economics. The continent wants the government to provide for them every need and luxury. Anyway, we knew Tsipiras to be a disaster before he took the stage. No surprise. Just like anyone with half a brain could see Obama was not going to be good for the United States before he beat Hillary in the primaries.
Oh so long ago Frederic Bastiat nailed the current diseased European policies as "legal plunder." Now all will pay the consequences for believing they could vote ourselves into prosperity.
My county, 'Murika, is no better.
Tspiras and Varoufakis never meant to do what the voters said (in fact Varoufakis was suprised at the outcome of the referendum). There sole goal was to take the EU to the limit to drive the best deal possible for the Greeks. Merkle blinked, Obummer whispered and it seemed things would go good for the Greeks. Then non-politicians like Schauble interjected there sensible thoughts and here we are again. It's all bullshit...get a new bag of popcorn, sit back and enjoy the show...this one might be good enough for an Oscar for best comedy of the year.
FYI referendums need money to be held.And after holding an express one (with on at least shaky constitutinal grounds) amidst financial siege and seeing its results, a new referendum might as well be a call to armed revolt.
He overplayed his hand, lost in his romanticism, blindly seeing his persona/trusting his charisma (which no s*it-does nothing for you outside of your country) AND trapped between a mixture of hardcore eurosceptics and people who just wanted "a better deal". If you ask me he went all in in the last round of a roulette's red or black,and gambled on green/zero.
As one fellow put it.. (during the post 2009 crisis) all previous greek PM's went to Angela,dropped pants and sucked cheerfully on the strapon to lube it,trying to get through the ordeal quicker.Tsipras wanted in to play hard to get, so it got a lot more violent for him.
TPP Membership?
"Investors sidelined.."
LMFAO. That's rich. In what world?
Cuz every broken markit has people waiting to just jump right in. Delusional.
I read that "investors sidelined" and thought how do these people get paid to write such horseshit. Perhaps if the major corporations weren't buying back their stocks hand over fist the S&P would be at a level that might be worthy of my money. Perhaps if the fraud perpetrated 8 years ago was dealt with I might be an investor. Perhaps if mark to fantasy and non gaap wasn't the norm I'd be an investror. Perhaps if we had a "free market", less government debt and a more equitable distribution of the 5 trillion (that we know of) that the FED created out of thin air, I'd invest my money in a ponzi scheme. Perhaps if GOLDMAN hadn't cooked the books of Greece to get them into the Euro I'd trust them and invest in the ponzi scheme.
WTF, who am I kidding, arrest some bankers and maybe, just maybe, I'd believe that the " free market" is real and "invest" some of my paper money. Until then its all a ponzi, bulshit market, based on fraud and lies.
So the EU leaders can now raid whatever Greece has thanks to their turncoat leader.
The Greek people should be outraged and hang the guy.
I doubt this is over.Neither the hard left or hard right are going to sit down for this.
I was amazed how many self declared communists and fascist there were in Greece decades ago.
Greece being 'fixed' is very premature IMO.
+100 On this I totally agree. Even if the outcome of the referendum was "wrong" - and it is not, for Tspiris to flatly ignore the wish of the people is tantamount to saying that "your vote really doesn't matter." Tspiris threw his country and its people under the EU and ECB bus, plain and simple. But, should we be surprised? this is how socialism works right? Moral hazard everywhere and no real rule of law when it comes to the protection of property (currency and so on). Entrepreneurship must be almost dead in Greece. A country riddled with impoverishing economic policies that instill permanent perverse incentives - all of which leads to an unproductive group of people who have no ownership or control over their lives. Its depessing and the thought of how this all pans out is discouraging at best and I (we) don't even liver there! For part of what motivates the voluntary production and exchange of scarce resources is the thought (expectation) that what one earns from solving economic problems in the market place, one gets to keep. And yet it is this very expectation that is least prevalent in the minds of Europeans.
Its ironic and pathetic - at the same time.
You sully yourself in stereotypes about Europeans applying your thoughts to a whole continent. Do you even know that there is not one 'kind' of socialism? If American clientelist capitalism is so much better then why is it that you have so many homeless people romaing the streets and we don't? I'm not a proponent of socialism but I refuse to believe that the unequal system that persists in the US is any better. What it comes down to is how efficient government is, if it uses public funds effectively without wasting it then any country is better off, regardless how much it organizes its social expenditure.
You are misunderstanding what i am saying. The EMU is a destructive formula by design because it does not, becuase it cannot recognize the economic and political differences of supposed sovereign states. Its a fake hegemony at best and the problem with it is that as an institution it cannot accommodate variances across varying degrees of the welfare state. BTW, the US comprises a form of state socialism - crony capitalism - where the welfare of the few is protected through a political process of lobbyists and payola. In other words, it aint any better and it was never my intention to contend that it is/was.
But, the EMU is just an example of what happens to all central planning initiatives - they fail miserably and essentially for the same reasons - it is impossible to centrally ascertain the intertemporal preferences of an entire nation of people (or in the EU's case - groups of nations of people), and then expect an efficient allocation of resources to follow. Central planning has never worked and never will work when the system is absent accountability (i.e a market), and instead what prevails is the primary ambition of gaming the system (moral hazard).
Finally, how efficient government is?, is a question that one cannot provide an answer to, for in order for it to exist it must take resources from productive processes elsewhere. The question is not whether government can be said to be efficient. The question is what is the least cost form the government should take? And the answer to that is and always will be, as small as possible. For the larger it gets, the more it interferes with productive exchanges and ultimately kills incentives for that kind of voluntary production to continue.
I think that in time, on their own and the drachma, Greece would have figured this out. Under that status quo arrangement, nothing is going to change, nor do I or anybody else actually expect it to change. And this was the point.
Certain latitudes infuse their people with a sense of general full-fillment.
Call it the latitude lassitude.
Cannot be mechanized, civilized , time-bound or rule-bound.
The greeks ran time by the tides and stars. This clip clip pace does not suit or fit.
Just like here in India...
https://aadivaahan.wordpress.com/2013/10/04/the-spirit-of-india-in-one-p...
What's the deal with this PAN card requirement to buy gold in India?
http://www.reuters.com/article/2015/07/12/india-gold-idUSL3N0ZN3Z720150712
India is going full STASI/MOSSAD retard..... we are one of the fortunate recipients of an APCO created prime creature.......
CCTV, NUMBers, tracking, biometrics, national id card...
full court press...
Oh, thank you Goldman. And who gets to loan countries money that they did not earn or save? Would real savers support an unsustainable lifestyle?
Real savers would not support it, but show me someone who can save and if that individual can save money, Is he/she actually saving?
What better way for Goldman to acquire Greek assets at firesale prices than in a total collapse. It's why Goldman got Greece in the EU in the first place and why the straw man Germany will take the heat for this screw up. When you're a squid banker it's all win-win at the expense of everyone else.
Lemme check again, just to make sure..............................
Yep, it's a small club and I'm still not in it.
Dear Arnold,
We are so pleased that you recognize your proper place in the centrally planned future. We sincerely hope that after a few years you will hardly notice the boot smashing your face into the mud continually.
Signed,
Your Banking Overlords
Typo? You mean Goldman is part of the reason the system will collapse?
Goldman Sachs is the new Zimbabwe investment banking dilemma.
The Greek parliament still has to pass it and if the do they will deserve the consequences and if they don't the EU will take a hard fall in the markets........
Coles notes.
We have paid off the assholes in Greece.
Up next, France.
The cleansing is needed, it will help usher in the new world Nazisum that the powers so desperately desire.
The crisis has gone exponential.
What will Germany do when Spain, Italy, France, Greece have 80% Youth unemployment? and suddenly not one nation is collapsing but 4-5 at the same time?
It would of been prudent of Germany to pass a Eurozone debt relief program across the board to all Euro zone nations. . . . just put collections on hold for 5 years and get rid of the stupid VAT taxes that are crippling consumption and businesses.....
Its like the Euro is run by a bunch of morons or they are trying to cause a crisis.
This shit is the worst, all these countries handing over their sovereignty and dignity to a room full of un -elected uneducated low class morons. . . what kind of outcome could you possibly expect?
Its almost as if the "leaders" of these nations want to lose their sovereignty. Like they are being commanded too.
Whatever Goldman publishes to the public do the opposite.
You will win.
It's all fun and games until Goldman Sachs runs out-of-pocket money. I'm sorry, our speculative game didn't pan out. We need a new TARP infusion by US taxpayers.
How does one run out of pocket money, when they can invent currency at will?
"Capitalism" simply can't work if innocent tax-payers are continuously forced to support and subsidize ongoing criminal fraud in the financial services industry.
"Central Banking" can't mean "stealing money from people to give to bankers"
Fascism works great until the economy collapses and people start running around chopping each others' heads off.
When you Grab them by the BALLS their Hearts and Minds will Fall.
George Bush quote?
Close bull, Christine sLagarde.
Jeff Gannon acknowledges the truth in this statement.
Obama? But you do it nicely, see...
what do you think jade helm means
(+1 to you if you know it means your balls in a vise)
And pray tell me anybody, why should anyone be paying attention to what Goldman says? Aren't they the very people who were behind this entire mess from the beginning, and profiting from it all the way?
Do the world a favour Goldman, go away...forever. We have no need for vampires like you.
Yep. Thats Zionist Bankers for you
Come on! The scenario of a federalized Europe is unrealistic. Not only because the electorate would replace working by vomiting but also because the economical strength of Germany is insufficient to make european transfer payments for more than a very short period unless the German citizens would agree to accept the living standards of - let us say - Bulgaria. That is not totally excluded because the population has been successfully brainwashed by media such as "Die Welt" and "Frankfurter Allgemeine Zeitung" but there is still a significant risk that the brainwashed could wake-up timely enough to spoil the party.
GS says hear what we say, do not weigh what we have done.
Greece is being pummeled when it's Goldman who were bankrupt and bailed-out and who should have been dismantled like Lehman.
Think about this as the sheer illegality is overwhelming.
The whole system is fine as you see by the fact that we have been and still are at all time highs in all US equity indexes.
When Central Bank say buy stocks you buy stocks. F what GS says. They have been buying every day I am sure.
So, GS just went long? When they say everything is fine, then you will know they are short...
They say that for wars you need tanks,
But the truth is you only need banks,
Dont need to fire no shot
Just take what is hot,
And the people believe you are swank.
TWENTY FIVE BILLION.
That's it for the "Bank recapitalization plan."
That might last ...six hours.
Then...YET AGAIN...all the Banks will close.
Not just in Greece either.
I stand corrected on the NYSE closing, hehehehehehe.
Looks like we have an American MONSTER here.
Folks in Eurpoe gonna be scraping for every dollar soon so I say again: good luck finding any. The huge energy boom inside the USA has Herbert Hoovered them for the time being.
That's quite funny, given the European Court covering Goldman-Sachs' fumbling with the greek books.
http://www.zerohedge.com/news/2012-11-29/goldman-wins-again-european-uni...
U.S. banksters picking apart gullable and greedy EU politicians and industrials? Outplaying them, as the douchebags try to cover their own arse? Do as we say, not as we do? Or something else?
"Germany continues steamrolling all other insolvent, peripheral nations with gradual annexations of national sovereignty as it has just done with Greece, which will be forced to hand over 25% of its GDP in the form of a liquidation escrow fund to Brussels/Berlin to do as it sees fit."
Ironically, this is exactly akin to American taxpayers having handed over 25% of US GDP to the Federal Reserve ... without their approval and even awareness where it sits on its books - to do with it as they please, to help their banking and corporate cronies. Our politicains and bankers did to us in 2008 what Germany is now doing to Greece.
Of course, GS know. When there is only one party to deal with, things always go better ... for GS et al.
This isn't "north" vs "south" but "old" vs "young."
If you live in the West and you're >50 - you want the existing system to be cemented into perpetuity (despite ongoing deflation and destruction of your children, entire generations giving up the thought of having a home, career, family, etc)
If you're <40 - you want the whole system to collpase now - so that you might have a chance to have an economic future that would come along with the reconstruction.
Presently, the Baby Boom (me me me me me generation) is in charge - and they are naturally voting to keep all the money from themsleves and throw younger generations out on the street - literally.
My guess is that - once youth unemployment moves >50% and tax rates climb >100% there will be serious political problems in those nations determined to eat their own children.
This isn't "north" vs "south" but "old" vs "young."
If you live in the West and you're >50 - you want the existing system to be cemented into perpetuity (despite ongoing deflation and destruction of your children, entire generations giving up the thought of having a home, career, family, etc)
If you're <40 - you want the whole system to collpase now - so that you might have a chance to have an economic future that would come along with the reconstruction.
Presently, the Baby Boom (me me me me me generation) is in charge - and they are naturally voting to keep all the money from themsleves and throw younger generations out on the street - literally.
My guess is that - once youth unemployment moves >50% and tax rates climb >100% there will be serious political problems in those nations determined to eat their own children.
If there is one thing that's been proven over the last 100 years of centralized banking, it's that moral hazard is immoral.
Goldman on Greece Translation:
Trembling Tapeworms! The host can no longer feed me!
There is a simple choice to be made. Either banks take their own losses on the bad loans they make, or the world submits to global Fascism.
When does this turn into a shooting war?
The history books tell us that when the US was created the key to making it work was both a separation of power and representation for all. A stable nonhomogeneous union seems to require both elements. The fact that the banking powers have since the beginning of the US been determined to undermine a separation of power is really neither here nor there (think of them as a destructive aberration of human society). The key is that if there is a REAL desire to have a stable union, there must be a separation and sharing of power (no taxation without REAL representation ... Schaeubel can't just dictate austerity for Greece because he/Germany has the greatest amount of power)
Part of the problem is that there is this false illusion that must be maintained that debt-money is real and has equal value to those who create it and to those who need it.
In fact, debt-money is arbitrary and asymmetric (it can be created in infinite amounts with nothing more than a couple of keystrokes), to those who create it and essential to those who use it. Those who create it maintain the illusion that they believe it has symmetrical substance simply so that they can maintain control.
I do not think that the Europeans/bankers/technocrats are really serious about a union. They seem to be most interested in conquest, the more powerful enslaving those with less power. Until the idea of conquest is discarded, there cannot be a real union, no serious progress can be made and the slaves will always trying to free themselves from their slavers... especially now that they ALL understand that they are in fact slaves. One illusion has been exposed.
Translated out of GS into English, this means "give us Eurobonds". Banking-aligned people like Jean-Claude Juncker and GS old boy Gavyn Davies have been pushing for EU fiscal federalism for ages. (Despite his rant before the Greek referendum Juncker's far from being the most Greece-hostile of the big EU pols.) They haven't really succeeded yet of course: all they have so far is limited promises of QE. It will be interesting to see if they make more headway the next time Greece comes to the boil.
So the Greek government commits fraud to join the Eurozone, rigging its balance sheet with the help of the Vampire Squid itself. But now that they're in on that basis, things aren't working out so well for them. Yet according to the consensus here and everywhere else, I'm supposed to feel sorry for the poor Greeks.
Balderdash. They should have been kicked out as soon as their scam came to light, and GS sued into penury. But no, everybody in Europe except for Nigel Farage has drunk the EU Electric Koolaide laced with lysergic acid diethylamide.
In short, you people are hallucinating.