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Credit Event Or No Credit Event, This Will Get Messy

Tyler Durden's picture


We have noted again and again that the seemingly single-minded effort to avoid a credit-event or involuntary restructuring is yet another one of the actions of an ignorant and ill-informed elite who simply do not understand the unintended consequences of any and everything they do to calm a desperate banking system. Today saw Willem Buiter, of Citigroup, agree with our perspective in terms of both the realistic lack of impact from a CDS event on Greece (per se) and moreover his perspective that the lack of a credit event could throw bond markets into a chaotic state as seemingly worthless CDS contracts and CTD bonds are tossed like hot potatoes from one smart banker to another smart hedge fund.

The Greek 5Y CDS-Cash basis until last week - expect volatility to explode in this relatively calm position.


He notes:

Not triggering CDS in a deep Greek sovereign debt restructuring would likely be more damaging than triggering


In that case, the value of CDS as an asset class – which retains a significant hedging and risk management role – would be much impaired

The lengthy Citigroup prose is summarized rather simply as avoiding the trigger when it is obviously a trigger-worthy event (using our vernacular) could cause far more trouble than any they are seeking to avoid for fear of contagion and losses. Peter Tchir, of TF Market Advisors,  added this evening:

Given the number of European Leaders who are still up and making statements, it would seem we finally have a deal.  Either that or they were all clubbing together, which can't be completely ruled out.


50% haircut for banks.  Will the banks actually be forgiving Greece 50% of their obligations or are the banks about to get some super cool security that has lots of bells and whistles, so they can say it is a 50% write-down?  I'm betting the latter, which just means EFSF funds get used up more quickly.


This will NOT be a Credit Event.  As I sent earlier, it doesn't fit the legal definition of Credit Event in the ISDA documentation.  I would expect the "basis" to go out of control, as banks sell useless CDS hedges.  I am not sure what the immediate impact on the broader sovereign bond market will be.  It may try to react positively to the "deal" and the CDS tightening, but I would be careful as sophisticated banks will be busy selling their bonds now too.  The "dumb" banks will probably try and sell as much sovereign CDS as they can and cut bond exposures in other countries, because this is now the best risk-free asset on the planet :)  The CDS does remain outstanding, so it doesn't go away if it doesn't trigger.


It will be interesting to see who participates in the "haircut"   Will all the banks really participate?  Will the ECB's bonds be included?  Will bonds held by Greek pension plans?  What about bonds held by hedge funds?  I would assume anyone who manages to keep some old bonds should see an increase in value (if the haircuts are real, and not just a symbolic calculation).  Who gets forced into participating will create precedents that may have some serious impact on the market.


The new capital injection calculation of just over 100 billion EUR seems low.


The idea of austerity in Portugal will likely be thrown out the window.  Going to be hard to suck up and swallow austerity when your buddy down the road just got some debt taken off the books.


Italy will have to play nice so it can get some of the leveraged EFSF money - which is as likely to just cannibalize the straight debt as anything else.


The rating agencies will finally have some real numbers to play with as it seems details have to be getting close.  I don't think their reactions will be particularly positive - as it does nothing to fix problems at the weak countries, and drags France and Germany into the morass.


It should be an interesting morning, and about the only thing I am truly certain of, is I would not want to be long the basis package if I worked at one of the institutions that agreed to the IIF deal (assuming it is a real deal and actually has real haircuts).  I would love to see the look on the faces of some EU ministers when they realize that hedge funds are probably the largest beneficiary of their blatant manipulation of the Greek CDS market.


If they ever get around to creating the EFSF, I would read the fine print very very very closely.


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Wed, 10/26/2011 - 23:17 | 1815750 qussl3
qussl3's picture

Bear Stearns.

Wed, 10/26/2011 - 23:50 | 1815897 AbelCatalyst
AbelCatalyst's picture

Um, anyone know why the futures are melting up? Did I miss a memo?? F'ing bizarro world: default is NOT a credit event and it's super bullish?? What the f$&@( is going on here???

Thu, 10/27/2011 - 00:23 | 1815983 JLee2027
JLee2027's picture

Everything is bullish to robots.

Thu, 10/27/2011 - 00:28 | 1815999 Harlequin001
Harlequin001's picture

Going short is easy; collecting on it is a different matter...

Thu, 10/27/2011 - 02:25 | 1816193 Western
Western's picture

So are "they" refusing to trigger this credit event because as it turns out the hot potato was in France's hands when all this started going down down, and now they're busy trying to stall the game and pass it on to someone else? Who can possibly be interested?

Thu, 10/27/2011 - 02:46 | 1816212 qussl3
qussl3's picture

I think its more about the optics.

The EZ cant have a member default otherwise it's not different from argentina, russia.... etc

Even the retards up top know its far more expensive to do it this way, but as long as they dont go cap in hand to the supranational lenders the IMF, they will always be able to pass the costs onto to either the serfs or the external buyers.

The key is maintain control of the supra national entity like the IMF, world bank...etc

Better known as the global bankers.

This is why the BRICs dont want to play ball until they get to call the shots there.

The deputy director concession was already a major loss for the west.

Thu, 10/27/2011 - 02:53 | 1816224 CrazyCooter
CrazyCooter's picture

Folks, this is already a primo scam. Roll with me here ...

ISDA gets to call "default" or "no default". When you see news that 50% isn't a default, you should really stop and think about that. Just for a second.

ISDA will throw the CDS market into a panic with uncertainty. Insiders, who know the final call (which may not be known until the right-turn-clyde can be valued against the left-turn-clyde) will accumulate winning positions in the chaos, likely at sub-par prices. This is betting against the house in a casino, your odds are sub-par, so if you don't get fucked, most others will in general terms.

Then ISDA will pull the trigger, like a big game hunter passing on buck after buck waiting for the right rack to shoot his ... ahem ... load.

You are all fools for even participating in this game. Pack it into PMs or refund your OPM and have some credibility left.

We US citizens are fools for having bank regulators who will back it with our deposits so we can pay to replace the funds.

Can't we just skip to the hangings? This shit show makes me angry. I need my catharsis.



P.S. Late to the thread. I needed to rant. I will read now and then go to bed...

Thu, 10/27/2011 - 03:49 | 1816276 Hephasteus
Hephasteus's picture

I spent the weeks of last summer or maybe it was the summer before that rummaging through the ISDN.

All I got out of it is a bunch of worthless lawyers without any adult supervision.

Thu, 10/27/2011 - 02:56 | 1816228 Eurodollar
Eurodollar's picture

ehhem, even if most people in here seem to be doom mongers it should be allowed once in a while to think. EU has taken steps to actually agree on something. It isn't small stuff either. Sure, there will be challenges ahead, and this may be a CDS trigger or not (Maybe ZH can run a post on the players and how they will vote on such a decision). The main point of the night: EU can agree on something! They have shown leadership and ability for once. That bodes well for the future. I am sorry to say, but believing the market would take this negatively in my not so humble opinion is naive at best.

Thu, 10/27/2011 - 03:08 | 1816241 qussl3
qussl3's picture

The mentality you describe is precisely why we get long periods of calm then abrupt major panics.

The problem is that the calm periods are getting progressively shorter, simply because the same tricks are becoming more and more transparent.

It's not a matter of IF but WHEN this blows up.

It would have been much easier if we just allowed markets to clear, and the bad actors take their losses.

Now we have massive misallocations of resources because the pricing mechanism is completely fucked.

Although it is very likely the media apparatus can keep the masses placated and credulous in perpetuity, our complex energy limited societies cannot outrun the missallocation of capital forever.

This will blow and it will be very messy, i just hope it stays conventional and not in my fucking backyard,

Thu, 10/27/2011 - 04:39 | 1816326 Eurodollar
Eurodollar's picture

I also have a strong feeling it is just a matter of when. Personally I am in a position where I am building a war chest for investing through my own business and I am grinding through finance studies and taking asset valuation courses from an investor who has had excellent results over many years. For this I am happy we are not getting the implosion now :) When it finally does arrive I will be ready!

That said; there are simply to many ways that lead to a epic FAIL. A sneeze in China can be enough to send the Union spiralling down the toilet.

Feeding the bayes theorem motor with the latest input, I think it is fair to say that "When" now will be further into the future than most people on here believe. I am fully aware of the trigger/downgrade issues that potentially could reverse this, but one can't overlook that the EU leaders have shown they are able to take steps to solve what by their perception of reality is thrown at them to a certain degree. They are the ultimate can kickers, and they will probably be able to retain the Heavy Weight Can Kicking belt for a long time unless there is some external factor that gets in the way. This is good news for us all in a way. We live to buy one more thing. Less austerity yet, and we get to position us well for when the fan gets full of shit as it always does and always will

These are just the two cents of a pollen in a very very large ocean. I really love the posts on this site, but feel the negativity might take over a little bit too much :)

Thu, 10/27/2011 - 05:11 | 1816342 qussl3
qussl3's picture

I'm in broad agreement with you for the most part and concur that it can get too negative here, the articles are still great tho :)

But im not too sure about the half life of this particular can kick. I dont think we will see new highs before we test the recent lows.

That said, the next implosion will not be the "big one".

That is likely awhile off - when oil is 250 and water gets expensive, particularly in China.

I think ZH really has the most value to those who can avoid the cardinal sin of investing - losing your money instead of your opinion.

With liquidity the prime factor in markets, how do you reconcile its effects regarding valuation?

Isnt it just simpler to just buy when the pump is primed and sell when it takes a breather?

Thu, 10/27/2011 - 06:39 | 1816390 Eurodollar
Eurodollar's picture

I agree, the posts/articles on ZH are a much welcome reality check from the pump, dump and re-pump manipulative mass media. I used to tear my hair trying to see through the bullshit. ZH has been a revelation in that regard. I just urge the posters to not fall for the commercial trap that is feeding the comment-monsters what they overall seem to crave: "negativity". There are a lot of positives in this world of ours too. We are just too busy being busy and too pumped, dumped and re-pumped to notice :)


I am obviously far from an expert  and I guess I haven't really earned the right to an opinion to take notice of. That said, I do of course have one :) I also believe all the can kicking experts will be able to keep the obvious-for-all-to see-at-some-point-to-crash social ponzi scheme up for quite some time, come what may. We have lots of emerging economies with a lot of debt potential to ruin before we get to the end game of this one. Imo we will see severe volatility, we will see oil and other need-to-function commodity prices surge and I am fairly sure we will see a certain degree of inflation (allthough I theoretically can see a case for deflation acceleration too given the right circumstances).


I agree on the liquidity issue. It keeps the markets together. It makes pricing stocks very difficult for a novice like me as you can never really be sure of the model input and you can most definately trust your uncle market to deliver the result you want within the time frame you expect no matter how much value you believe you found. That said; i still believe in paying less than 80 cents on the dollar so at the I look for value stocks where I also feel the short term demand will be high, where the business has a solid current ratio and a even more solid interest cover ratio. This way I hope the ralleys will bring immidiate wealth to my pockets. I obviously also take notice of which, if any commodities it uses in its production as these costs can run away quickly and not be sent onwards to an already pressured consumer. I also will buy more into useful commodities that will always be in demand when volatility allows. Trading as per se I will not touch. Fighting the machines who trade into the future does not really strike me as a good idea. At least as of now. I simply don't have the skill.


Again, just the two cents of a plankton. Handle with pretty much every concern on the planet!

Thu, 10/27/2011 - 03:16 | 1816250 Catequil
Catequil's picture

if they keep up deciding like this, it won't be long until EU is in no position to decide anything whatsoever simply because it won't exist. CDS event or not, the moral hazard has been instituted last night.

Being an EU citizen and a taxpayer I want my country out of EU, as it appears to be a system awarding wreckless greed (banksters) and laziness (greeks).

Thu, 10/27/2011 - 05:26 | 1816350 johngaltfla
johngaltfla's picture

Becoming Zimbabwe is bullish.

Wed, 10/26/2011 - 23:18 | 1815757 kito
kito's picture

thank you tyler for some clarification on the consequences of a "non trigger" trigger...

truly yours,

ignorant and ill-informed non elite

Wed, 10/26/2011 - 23:19 | 1815766 winter is coming
winter is coming's picture

buy buy joke.... even if we start todrop, youll get out with aprofit

Wed, 10/26/2011 - 23:23 | 1815789 Hopium Dealer
Hopium Dealer's picture

You must have a high-level job at a major French bank.

Wed, 10/26/2011 - 23:46 | 1815886 winter is coming
winter is coming's picture

more like seen major drop in my december and january puts... time to hedge i guess

Thu, 10/27/2011 - 00:06 | 1815948 Central Bankster
Wed, 10/26/2011 - 23:20 | 1815770 caerus
caerus's picture

good times...

Wed, 10/26/2011 - 23:21 | 1815775 Mactheknife
Mactheknife's picture

Who, in their right mind, would ever again loan any of these people money? Guess that just leaves the Bernank.

Wed, 10/26/2011 - 23:29 | 1815816 qussl3
qussl3's picture

Most idiot pension and insurance managers most likely.

Idiots with OPM.

Wed, 10/26/2011 - 23:23 | 1815788 SWRichmond
SWRichmond's picture

seemingly worthless CDS contracts

Obummer and that f*** Ratner rendered 150 years of bankruptcy precedence worthless by telling the Senior Secured Bondholders to take a flying leap.  Why should EU CDS contracts be any different?

All government is good for is lying, stealing, killing, and destroying that which the free enterprise system creates.


Thu, 10/27/2011 - 03:01 | 1816234 CrazyCooter
CrazyCooter's picture


This is the HEART of the entire matter and people should make sure they understand exactly what SWR said. If you don't and you are in this market, you have an ass/colon like the CA/T, you just don't know it yet.



Wed, 10/26/2011 - 23:24 | 1815793 Kina
Kina's picture

Sorry, half your house burning down is not an Insurance event.

Thu, 10/27/2011 - 03:02 | 1816235 CrazyCooter
CrazyCooter's picture

Bzzzzzt. Insurance is regulated.

Oh, you meant CDS. Ding-Ding-Ding we have a winna!



Wed, 10/26/2011 - 23:25 | 1815797 tekhneek
tekhneek's picture
This Will Get Messy

I concur.

Thu, 10/27/2011 - 00:38 | 1816016 slewie the pi-rat
slewie the pi-rat's picture

i'll third that, t_k!

mr market will not be mocked forever, imo

i just finished my popcorn.  time for some greek yogurt?

Thu, 10/27/2011 - 00:41 | 1816030 hambone
hambone's picture

Mr. Market is in a deep, deep coma since March '09...don't look for any organic response there.

Thu, 10/27/2011 - 03:07 | 1816242 CrazyCooter
CrazyCooter's picture

Mr. Market will not be showing up until this entire house of cards burns all the way down the ground.

I would like, if I may, to coin the phrase "Serling Markets" ... close enough to sterling to lure in the wishful ... besides, Rod has to be hanging out explaining this show to the audience we can't see so they know exactly what is going down.

Feel like that?



Wed, 10/26/2011 - 23:27 | 1815807 dr.charlemagne
dr.charlemagne's picture

ok. so my nov 126 spy puts? toast or golden?

Wed, 10/26/2011 - 23:27 | 1815808 winning
winning's picture

they know nothing, NOTHING!!!!!

Thu, 10/27/2011 - 00:55 | 1816066 HD
HD's picture

Now where have I heard that before...

Wed, 10/26/2011 - 23:28 | 1815811 merchantratereview
merchantratereview's picture

So do I short or long the EURO????????????

Wed, 10/26/2011 - 23:36 | 1815846 Aguadulce
Aguadulce's picture

Just buy phys gold and silver. They can be whatever fiat you want them to be.

Wed, 10/26/2011 - 23:29 | 1815820 Kina
Kina's picture

Under $2000 gold is strarting to look cheap.

Wed, 10/26/2011 - 23:30 | 1815823 surf0766
surf0766's picture

This is the best site on the web.

Wed, 10/26/2011 - 23:31 | 1815826 AndrewJackson
AndrewJackson's picture

Does anyone else think that this aggreenment has just given the green light to contagion? Like TD said earlier, what incentives do the other countries have to tighten their belts if bad behavior implies debt reductions? I would bet on "As greece goes, so goes the rest of the pigs". I am with qussl3, this is Bear Sterns.

Wed, 10/26/2011 - 23:40 | 1815862 Aguadulce
Aguadulce's picture

Oink oink muthafucka!. Are the PIIGS now just the PIIS?

Wed, 10/26/2011 - 23:42 | 1815870 wandstrasse
wandstrasse's picture

hey, there has NEVER BEEN ANY incentive to tighten the belts, for NO country. The debt fiat system FORCES everyone to INCREASE debt, and averts the opposite.

Wed, 10/26/2011 - 23:36 | 1815837 chump666
chump666's picture

i don't think anyone knows what the F-is going on.  I'll wtach 5yr CDS on Greek bonds, closely watch Italian bonds and see if the bund/PIIGS spread starts to tick up. 

I agree that if the CDS market starts to trade with 0 value, the markets may set some kind of 'event' in motion.


Wed, 10/26/2011 - 23:44 | 1815872 qussl3
qussl3's picture

Nobody is buying BS debt if they cant hedge it if necessary.

Not even with an insurance backstop of 20%.

Oh, i forgot that backstop doesnt exist yet, cos it hasnt been worked out.

Even better, the funding for the backstop comes from the same debtors whose debt its supposed to backstop.

I guess if i chase my tail long enough ill finally catch it.


Wed, 10/26/2011 - 23:50 | 1815898 chump666
chump666's picture

That's a good point, also I think people will short  (European) CDS's outside of EZ markets, if they going zero worth. A bidless trade  I'd also watch for the liquidity squeeze in Europe as their sovereign trade/debt markets  look like they will be put to death.

Thu, 10/27/2011 - 00:41 | 1816031 Harlequin001
Harlequin001's picture

So who's going to take the other side of that trade now then?

Thu, 10/27/2011 - 00:43 | 1816036 chump666
chump666's picture

Sarkozy hahahaha

Just in time when S&P downgrades France.  Morons. 

Thu, 10/27/2011 - 02:56 | 1816222 qussl3
qussl3's picture

I beginning to wonder how the hell France can possibly maintain its AAA, the economy is slowing, they are going to be taking more debt to fund the EFSF, plus they will need to backstop their banks regardless of the BS they are now spewing about private capital.

France has alot of new bills to pay and only more debt to pay it with.

Furthermore, this idiot game of keeping the EUR strong to give the impression of a stable store of value is going to kill EZ exports to the states.

They've pretty much used all their bullets here, they've open even france and german bond mkts to contagion with this crap.

If any of the other PIIGS comes hat in hand it is over.

This really is bear, where they could have stopped the shit from flowing but now they've bet the bus on AIG, and hoping there wont be a lehmann.

Unfortunately, the Italians have already shown how credible they are with that BS pension reform plan, not to mention Spain's shitshow with the hidden debts, or the strangely silent Portugese.


Wed, 10/26/2011 - 23:36 | 1815845 wandstrasse
wandstrasse's picture

retail banks will soon offer CDS pieces: 'Serious banking for you and me', 'High finance for low budget', 'invest like a statesman'....

Wed, 10/26/2011 - 23:39 | 1815859 AndrewJackson
AndrewJackson's picture

To funny.

Thu, 10/27/2011 - 01:02 | 1816078 eatthebanksters
eatthebanksters's picture

synthetic CDO's made up of worthless CDS'?   Just substitute the CDS for the old mortgage backed security...billions, trillions!!!

Wed, 10/26/2011 - 23:40 | 1815863 htp
htp's picture

It's obvious they want to save the euro, sacrifice everything else if necessary.

But it doesn't solve the problem. Greece can't pay the remaining $250 billion in debt.

Then again, there is no solution. This is the best they can do at the moment.

Thu, 10/27/2011 - 01:07 | 1816086 eatthebanksters
eatthebanksters's picture

the right hand is tired...timeto switch to the left hand...

Thu, 10/27/2011 - 03:16 | 1816248 CrazyCooter
CrazyCooter's picture

The paranoid voice inside, that I learned to subdue as I got older, tells me there was a plan to blow up the whole world financial/money system and bring in a new global monetary authority ... but ... things are blowing up 12 months ahead of schedule and things are not in place yet ... this is the need to can kick ... while that 12 gets pulled down as close to 0 as possible.

I have a hard time seeing the evidence any other way ... i mean, pope pedophile is on the record for a new global monetary authority based on the UN ... this out of no where while OWS is busting up vets in demonstrations ... hardly a recipe for success ... more a hopeful roll of the dice ...

Iran has to be the new pariah. Oil is going to the moon if that happens. I don't trade, but get those way out of the money whatever you want to buy; its going to hit soon!

And if I make you millions, look me up and help me out ... I have not the capital or the balls to play this game ... but I think I have a bit of clarity none the less (and certainly better than some of the guest/contributor posters). My trade is getting out of the way of the train...



Thu, 10/27/2011 - 06:38 | 1816397 valley chick
valley chick's picture

Agreed CC ! 

Wed, 10/26/2011 - 23:43 | 1815871 zorba THE GREEK
zorba THE GREEK's picture

What bondholder would agree to a 50% haircut if he held a CDS from BAC which covered

any losses over 20% on his bond? Duh.

Thu, 10/27/2011 - 00:04 | 1815941 pods
pods's picture

The one who was just handed a picture of his kids on the playground.


Wed, 10/26/2011 - 23:45 | 1815878 monopoly
monopoly's picture

What is really interesting guys. We have not even talked about US. We are next up in this double header after Europe. Remember come Halloween we are in debt to the tune of 100% GDP. Now, isn't that nice.

What a train wreck headed our way. And with ghouls on them to sweeten the crash.

Wed, 10/26/2011 - 23:52 | 1815904 qussl3
qussl3's picture

I guess you didnt get the memo.

The zombies will be bailing you guys out.

Just make sure you leave your brains behind.

Wed, 10/26/2011 - 23:50 | 1815896 island
island's picture

Pure unadulterated 100% gambling when the terms of the bet are a moving target (i.e. can be redefined without all parties in agreement).  Clearly, only an idiot - or someone flush and doing it for the pure thrill - would play this game more than once.

If this goes as predicted - a 50% haircut without being considered a default - it could easily translate into ZERO trust in global financial markets for years to come.  Time will tell.

Thu, 10/27/2011 - 02:47 | 1816215 Dr Zaius
Dr Zaius's picture

As someone said above, if you can't hedge then who will buy the sovereign debt. There can't be that man stupid people in the world with money, can there?

Thu, 10/27/2011 - 02:58 | 1816231 qussl3
qussl3's picture

There are enough idiots with OPM tho.

Namely pension and insurance funds, who better to stick the bill to than the sheeple?

Wed, 10/26/2011 - 23:54 | 1815914 Mitch Comestein
Mitch Comestein's picture

Greece just went from first to third in the lineup behind Portugal and Italy. The Greeks will spend like mad or not work and ask for another bailout in three years. Next time they will be serious.

Wed, 10/26/2011 - 23:59 | 1815930 legal eagle
legal eagle's picture

Governments are supposed to define and PROTECT property rights - not destroy them by decree, I mean by fiat

Thu, 10/27/2011 - 00:36 | 1816017 stirners_ghost
stirners_ghost's picture

"Supposed to"?

You've got to be kidding me.

What are you, twelve?

I suppose they'll saddle you up and ride you at full gallop until some part of your anatomy gives out.

Rules are for you to follow, chum. Not them. Have you ever seen a parking ticket on a police car?

Thu, 10/27/2011 - 03:25 | 1816255 CrazyCooter
CrazyCooter's picture

A brief review of history will find only the occasional role for the common citizen that doesn't involve a yoke and a plow. Just sayin'...

Folks these days forget. Too good, too long ... time to pay the dues ...



P.S. 100 years ago the wealthiest citizens barely had electricity, electricity, refrigeration, cars, telephones, light bulbs, and so on. The poor take all this for granted today. Oh, and they have cable TV, radio, iTHings, social media, and all kinds of other worthless shit.

You have no idea the depths of where this can go.

I am in Alaska for a reason; I can shoot a dinner on the way home (I have driven past the same group of ducks just off the road for two weeks now) if I have a really bad day. Best of luck.

Thu, 10/27/2011 - 00:59 | 1816074 eatthebanksters
eatthebanksters's picture

This is one of those games where the kid in charge can change the rules at his whim, anytime he wants, to ensure he wins. Hmmm...

Thu, 10/27/2011 - 01:37 | 1816131 StychoKiller
Thu, 10/27/2011 - 00:20 | 1815977 Johnny Utah
Johnny Utah's picture

It would be comedy if it does not trigger a credit event. In which case, Credit Default Swaps = Worthless heap of dog $hit. That would be poetic justice to the banks and investment banks who will be up $hit creek without a paddle. Derivative contracts are only as good as your counter party...kick rocks fool!

Thu, 10/27/2011 - 00:50 | 1816048 flacon
flacon's picture

The mind does so many twists on that one. Insurance on an insurance company in case of a fire that has already been lit but the insurance company can't pay and now the insurance company of the insurance company can't pay. How many layers deep does this go? Ever seen the movie Inception? 


I won't be able to sleep tonight...

Thu, 10/27/2011 - 01:04 | 1816081 UP Forester
UP Forester's picture

The Roof!  The Roof!  The Roof is on Fire!

Thu, 10/27/2011 - 02:07 | 1816180 xtop23
xtop23's picture

Strong analogy and quite apt. Well said sir.

Thu, 10/27/2011 - 00:31 | 1816007 DormRoom
DormRoom's picture

wow, Kyle Bass is going to be pissed tomorrow.

Thu, 10/27/2011 - 00:57 | 1816070 eatthebanksters
eatthebanksters's picture

Something tells me that Kyle has this all figured out already...

Thu, 10/27/2011 - 03:27 | 1816258 CrazyCooter
CrazyCooter's picture

Kyle Bass will change his name to Kyle Bank by the time this is done. He will be the go to guy in Texas for business capital when the phoenix stirs.



Thu, 10/27/2011 - 00:56 | 1816068 eatthebanksters
eatthebanksters's picture

So going forward, how do you price a CDS?  If they are worthless then why buy them as a hedge?  All of a sudden the derivative market, which was supposed to take the volatility out of the securities market, can't do what it was supposed to will somebody tell me why we keep these worthless little troublemaking critters?  Oh, that's right, they are guaranteed bank for the TBTF motherfuckers who sell shit as gold to dumb fuckers in an opaque market...

Thu, 10/27/2011 - 01:20 | 1816098 Comrade de Chaos
Comrade de Chaos's picture

Not a CDS pro, so  :

So you, institutional investor not cool enough to hang out with the 'big kids' purchased some Greek debt and being a bit sceptical some protection on it. Big kids, got all related commissions. And you, you take somewhat expected haircut and lose protection payments as well, a win - win situation? (sarc.)

That will make any future EU bond investor, rather confident. A haha haha. (unless of cause, one invests other people money and panics on time to retire before the game is over, and the game eventually it will be over. )


did I get it right?

Thu, 10/27/2011 - 01:23 | 1816106 blindman
blindman's picture

so "money" is an instrument of debt and as such
is a political tool. it is fungible only in
political terms. it has no redeemable value other
than this. so quality has nothing to do with it.
value also. it is meaningful only in the political
realm, its nature creates the demand for the political
class, justifies the ascendancy of that class of parasites.
in this regard terms mean whatever the power structure
needs the terms to mean. the money masters ask ..
" how would you like your brains today, scrambled or
over easy?" those are the choices.
what does solvency have to do with it?
What's love got to do with it - Tina Turner
MONEY: Before Ron Paul, was Merrill M.E. Jenkins Sr. (M.R.)
MONEY: Before Ron Paul, was Merrill Jenkins (M.R.) 2
MONEY: Before Ron Paul, was Merrill Jenkins (M.R.) 3
MONEY: Before Ron Paul, was Merrill Jenkins (M.R.) 4
MONEY: Before Ron Paul, was Merrill Jenkins (M.R.) 5
Merrill M. E. Jenkins Sr., M.R.
The creators of the money pay for all costs of its production out of the quantity
produced. They purchase all they desire in the world at no cost. They design and execute
conditions to influence the public's honest response to be anything they want it to be.
It is never necessarily to bribe anyone directly to do anything, their form of bribery is
much more subtle. They use money to create whatever condition is necessary to bend public
opinion and reaction in whatever direction and to whatever degree their plans specify.


Ask yourself how you would think and behave if you were the possessor of the exclusive
right to create money that all the Public must accept for their labor or possessions (put
yourself in the place of the commercial bank 'elite'). Your first thought might be to
purchase the world and tell everyone else to get off! Your second thought would be to
keep them for slaves. Your third thought would be to control the media and all means of
commutation and production so they all had to conform to your indirect directives or
starve. Through control of commutation and "their" elected government you could
prevent them from leaving the flock. The Public would be your sheep ready and anxious,
through unawareness, to be shorn whenever you wished.


"These are the men who create the money we all spend . . . . in effect they
determine whether you will be able to buy a car, can afford to take a vacation or buy a
new home. Their decisions can effect the security of your Job . . . . in the deepest
secrecy they plot their strategy . . . everything is cloaked in deepest secrecy . . . in
making decisions they check with no one -­ not the President, not the Congress, not the

Page 14 Parade Magazine October 26, 1975

"Your" (banking elite's) almost absolute control of the media keeps the Public
quite confused, but what about individual conversation. Some individual might find out
the truth and tell another, and that one, several others, and they each many others, and
the word could get out. One way to combat the truth being distributed by word of mouth
would be to pervert the language so that a scientific discussion about money could never
take place.

"A pre­IMF seminar of eminent economists couldn't agree on what "money" is
or how banks create it."

Front Page Wall Street Journal 9­24­1971

Another way would be to turn neighbor against neighbor and shut­off word of mouth
communication. The easiest way would be to take advantage of the natural chain of command
and direct your 'money­is­no­object' influence to control the nation's natural leaders,
the ones the Public looks up to and takes guidance from. "Your" (banking
elite's) field of endeavor would be noticeably diminished and you could concentrate on a
much smaller target. Keep the natural leaders confused and you have the entire public in
your flock. As creator of money and master of all natural leaders (without their
awareness) you (as the banking elite) have THEIR control of the elected officials they
influence and the chain of command is whole and operating without anyone really aware of
who the supreme commander is. Because of your control of government is SECRET and
INDIRECT through the natural leaders there is a way in which your control could be
canceled, a new set of instructions fed through the system, the legal tender act
rescinded and the public permitted to turn in their bogus "bucks" for whatever
wealth is still remaining.

"Your" (the banking elite's) control must be secret, because if it were not
then everyone would want the privilege of creating money and no one would work for it,
therefore there would not be any labor or production to steal. Your control is through
the natural leaders who must be made to believe that they are the ones who are 'in
charge.' ...

Thu, 10/27/2011 - 01:52 | 1816159 blindman
blindman's picture
Merrill M. E. Jenkins Sr., M.R.
"The longer it remains undetected the more difficult it is to expose a false premise. Resistance to change builds with time due to familiarity and association causing less individual thought and effort required to perform a function. Changes always cause increases in the amount of human effort required to perform any given function and mankind has always sought to satisfy its desires with the least amount of effort. Thinking is a very special ability, that in fact raises mankind above the level of animal, but it appears to require a greater amount of effort than physical labor.

"There is no amount of physical labor man will not resort to, to avoid the effort of thinking."

Thomas Alva Edison

If the Public was to give some thought, they could not accept such concepts as 'Monetized Debt' which is based upon the basic premise that the more you borrow the richer you become.

Thinking about the existing conditions today: the government insists that the G.N.P. "backs" the "currency" in "circulation." It APPEARS true because an individual has to work to get "currency" therefore it is expected that others will give up their production or possessions to get it, (logical and rational superstructure). The Monetary Authorities (the commercial banks) that issue the "currency" say that the "currency" represents the monetization of debt and that in fact, nothing backs the "currency." "Currency" is accepted by individuals, for their goods and services because they believe that some one else will take it from them later in exchange for other goods and/or services. No one looks beyond the fact that the "currency" is still being accepted in exchange. Three quarters of all the "money" created is created by private institutions which through its purchasing power, exact three times greater influence upon government than the Public, and actually hold the non­bank public as their slaves. (Ref. Chapter LXXI "Money" the greatest HOAX on Earth."

". . .Private institutions issue the largest part of the money stock . . . ."

Page 16 Federal Reserve Bank of St. Louis Review February 1975

On page 22:

"The decrease in purchasing power incurred by holders of money due to Inflation imparts gains to the issuers of money . . . ."

On page 23:

"Monetary expansion and inflation come about primarily as the result of actions of the monetary authorities."

On page 4:

"When the Federal Government in June 1969 stopped trying to do anything about inflation it turned its activities toward developing scapegoats in order to get Americans to blame their neighbor for their problems. Had the scapegoat strategy not been so effective, it would be humorous."" ....

Thu, 10/27/2011 - 02:15 | 1816187 zebrasquid
zebrasquid's picture


If CDS is worse than no protection at all(since you had to pay for it and you counted on it), then isn't the impact of that revelation on the markets likely to be bigger than the credit event they were trying to duck?  Like shooting yourself in the head to avoid the pain of a toothache.

Thu, 10/27/2011 - 02:27 | 1816197 blindman
blindman's picture

the cds market was to be the loaded gun with which to stick up the
treasury. it worked once and will probably work again if the
masters can avoid shooting their own teeth out first. the politics
are everything here.

Thu, 10/27/2011 - 03:47 | 1816274 terryfuckwit
terryfuckwit's picture

yes you got it.. for cds read taxpayer backstop... bend over and smile....

Thu, 10/27/2011 - 03:36 | 1816266 e-recep
e-recep's picture

€100bn Greek debt is written off, a new loan €100bn loan to Greece is on its way. Nice, eh? You gotta love the fiat money.

Thu, 10/27/2011 - 07:22 | 1816472 overmedicatedun...
overmedicatedundersexed's picture

The pope is invested heavy in EU debt..talking his book. a sad day.

hey Tyler: this little item may be worth a thread:

Argentina ordered oil, gas and mining companies such as Xstrata Plc to repatriate all future export revenue as the government struggles to stem accelerating capital flight from South America’s second-biggest economy.


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