Credit Suisse The Sequel: "Probability Of The Largest Disorderly Default Loss In History On March 20 Has Increased"

Tyler Durden's picture

A week ago we presented an excerpt from Credit Suisse's most excellent piece "The Flaw" - merely the latest in one of the best overviews of the neverending Greek soap opera by William Porter. Yet every soap opera eventually ends. Although when it comes to Nielsen ratings, the denouement is usually a whimper. In the case of Greece, it will be anything but. Yet listening to the daily cacafony of din from Europe's leaders, who are likely more clueless than the average reader as to what is really going on, one may be left with the impression that there is a simple solution to the problem, and Greece may be "saved... in hours." It can't. In fact, as of today, Porter's s conclusion is: "we are left with a sense that the probability of delivering the largest default loss in history in a disorderly way on or before 20 March has increased relative to doing so in an orderly way."

As a reminder, Credit Suisse was the one smart enough bank which chose to completely ignore day to day newsflow out of Greece as it is literally noise with absolutely no signal. Wish we could say the same for FX traders. As such, CS' "view remains that, in any case, the chance of a disorderly outcome after 20 March is high, so to that extent the immediate events are not really central to our view, but of course are fascinating." Quite fascinating indeed, because they show to what extent an unravelling financial system will go to pretend that the number one unfixable problem in Europe - the lack of money good assets, available to either be sold, repoed, pledged, equitized, or otherwise monetized. As we have observed previously, at this point it doesn't matter for Greece- even if the country gets the second bailout, which will be used almost exclusively to recycle cash into the banking system, Europe will have a first lien on nearly 150% of its GDP. At that point the country is both a de facto and de jure colony of the Troika. The longer the bang, or whimper, is delayed, the fewer assets will remain in Greek possession, and the poorer the population will be for the inevitable fresh start, with or without the Euro.

So meandering regurgitations aside, because all this has been said one hundred times already, here is Credit Suisse's latest attempt at a fresh take on events.

We are cautious about reports of the exchange “running out of time”: the 20 March binding constraint is a GGB maturity. Greece is sovereign and has run out of money; it can choose the timetable. The case might be different if the maturity were an English law bond (but perhaps not much.)


The real issue remains the ECB’s exposure to the BoG, in our view. Protecting that (i.e., ensuring that Greece does not systematically default via introducing a new currency) becomes the bottom line, as the latest Flash explored.


Since our objection to ‘leaving EMU’ is that its corollary is systematic default, bank nationalization and the like, once the latter problems are a given, a situation towards which we seem to be heading rapidly in Greece, then the cost of the incremental step of introducing a new currency become less. Our view remains that the economy would subsequently euro-ize but potentially at a different cost level. The effect of the delay would have been to transfer the cost from Greek citizens (who have now moved substantial sums out of the country, providing in fact a source of subsequent BoP financing that makes the equation even more attractive) to the ECB. The core has a very serious problem and again should swerve, but the probability of a ‘crash’ is rising.


We remain very cautious about the long-term sustainability of the debt after restructuring, and it is just possible (not our core case) that the troika takes the rational decision that it is cheaper to let Greece default and reimburse the ECB for its approx. €30bn of GGB  losses than to pay the rising but nominally €130bn. Yet it was only on 14 February (two days before writing) that the ECB was confidently talking of distributing its GGB profits, so we are cautious about second-guessing the analytical framework being used.


Overall, we are left with a sense that the probability of delivering the largest default loss in history in a disorderly way on or before 20 March has increased relative to doing so in an orderly way. (Our view remains that, in any case, the chance of a disorderly outcome  after 20 March is high, so to that extent the immediate events are not really central to our view, but of course are fascinating).

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jeff montanye's picture

indeed.  and why do they so strenuously avoid the orderly default?  oh that's right.  for the same reason oedipus fucked up.  hubris.

phungus_mungus's picture

For the love of GOD let's get this over with already.... 

Dr. Engali's picture

Get what over with ? Is there something going on? Did I miss something ?

IndicaTive's picture

Nigel Farage latest. Someone alert the media. for the threadjack

Dr. Engali's picture

I have a man crush on Nigel.

JW n FL's picture

Nigel is a HOTTY!

I agree!

Man Crush!

we should kidnap him and bring him to America or Fight Club at the least!

flacon's picture

Why default when paper is FREE?! If we had a gold standard then I could understand a default, but why risk a banking crisis when it could all be taken care of with more cotton rags - I mean more pretty holographic crisp bank notes from the ECB?

dogbreath's picture

I have watched many video's on youtube of Farange and am dissapointed that a mere 4000 or 3000 have watched the clip.  he's probably like Ron Paul where the msm won't give hime coverage

chubbar's picture

I just watched the video and YOUTUBE is reporting only 303 views. Let's fact it, YOUTUBE, GOOGLE and the rest of these mega entities have been co-opted into being yet one more arm of the gov't propaganda machine. There is no friggin way only 303 people viewed this video.

Muddy1's picture

Nigel is a stud.  If we had someone like him running for President, he'd win by a landslide.  What cahones!

NorthPole's picture

Wake up. How are you going to win elections with all MSM ignoring you?

JW n FL's picture




Nigel Farage latest. Someone alert the media. for the threadjack


Great grab! Thanks for Sharing IndicaTive ! YOU! ROCK!!


Bring Nigel to America! PLEASE!! Pretty Please! wiff sugga on top! we will make his half toasted? toast and tea! whatever it takes! just get him here! Trade Obama or whoever the English want!

ConfederateH's picture

You guys already have Ron Paul, stop being so greedy.

StormShadow's picture

Yeah, I mean it's not like the citizenship requirement is a hangup anymore. Now that we have the Adobe amendment to the Constitution the whole world is eligible.

vh070's picture

Wonder why the Amadeus Amadeus tune starts up in my head every time I hear Puppet Papademos...

Ghordius's picture

you really love this darling of the City of London?

I find it strange indeed

He_Who Carried The Sun's picture


Merkel said in 2011 that it will be in 2013
and she's had her way so far and so she will in the future...

They will let this bail-out pass and at the same time
the EU prepares the ground for the exit of Greece in 2013.

Mr Lennon Hendrix's picture

she's had her way so far and so she will in the future

That is a logical fallacy.

slewie the pi-rat's picture

or an axiomatic assertion, depending which nipple i'm dealing with...

jeff montanye's picture

speaking of which, who is that individual below his name (which escapes me now)?  

our ace in the hole?  they really, truly, for sure and without a doubt, are insolvent.

and they are not just the greeks.  or the european banks.  or their insurers.  counterparties.  derivative customers.  ouch.  

the fed isn't able to be insolvent, or so it says.  what would you guess its net equity is now, now that they've sold off the good stuff?

HurricaneSeason's picture

The Fed had good stuff? What was it, Afghanistan heroin? They weren't suppose to lose that until next year.

The Reich's picture

For the sake of truth, is this an official denial?

Schmuck Raker's picture

@Dr. Engali

For GOD SAKES man, Whitney Houston is STILL dead!

Dr. Engali's picture

Shit that too?! Well get this. I was on another thread and apparently Greece is about to default ........ Any year now.

Schmuck Raker's picture

LOL, good one. I get it.

Like anyone would be stupid enough to lend money to Greece.

machineh's picture

Heh-heh, Tyler said 'cacafony'! Literal translation: shit-talkin'

Morning coffee's got my guts growling, off to BoG!

true brain's picture

For the love of Nothing let's get this over with already...

respect the cock's picture

If we have a deflationary collapse does that mean the price for hookers will go down?

masterinchancery's picture

"For the love of God, Montressor!" "Yes, for the love of God." The Casque of Amontillado, 1846, Edgar Allen Poe.

SnobGobbler's picture

this default will take till our next war....and fuck your CDS unless you are a primary dealer, they get the gold first remember...

TruthInSunshine's picture

It's all priced in, along with defaults of the rest of PIIGS+France+UK+US+Japan.



The Man in Room Five's picture

Why 3/23? I thought it was the 20th?

Rogue Trooper's picture

Look, the historians after 3/23 (once we get back to having paper) will certainly question why this day and how the profit "Booboo the Wise" was albe to predict the "Great Reckoning & Subsequent Fall" with such clarity.

The people will listen to "The Sayer" tell the old fable, "Thee shall say arhhhhhh and thee shall pay homage to and worship the great "Booboo" and hope for his return for he will once more speak again, provide infinite wisdom and steadfast clarity for the 99.  The Vilage "Sayer" will then instruct the people to charnt!

"3.23 or thereabout, with QE3, it's roundabout"

"3.23 or thereabout! with QE4, it's roundabout"

"3.23 or thereabout! with QE5, it's roundabout"  etc... for a few hours

I'm so over this.... I hope we are not hearing the same shit this time next year.


LiquidityandLunacy's picture

In all seriousness, should i buy food and take out cash from my credit union in advance of this? Maybe buy more ammo?



Just asking if this might be the d-day

Waffen's picture

You should have done this long ago. The writing has been on the wall and to say well it hasn't happened yet so you made the right choice.

Hindsight is 20x20

HurricaneSeason's picture

Stock up on gasoline, I have 1250 gallons in my garage so far.

LiquidityandLunacy's picture

dude i live in an apartment. If the shtf, im getting in my car and going to naples. Gimme wide open spaces and nato rounds.

respect the cock's picture

Um, hopefully all your shit is in a flammable liquid cabinet?

mkkby's picture

There is no threat to the ECB.  They print money, alright?  This is a big nothing burger.

Caggge's picture

A disorderly default from a disorderly economy. Just what should happen!

brewing's picture

whose going to cover the cds... no one...

jm's picture

What I wonder is if NBG will be nationalized or recapitalized.

Yen Cross's picture

 This is Sean's call. Over at Forex Live. I'm calling it ) You know the #.s SEAN!   You Farm BoY!