For Greece, "Tomorrow" Has Arrived

Tyler Durden's picture

Submitted by Mark Grant, Author of the Financial Commentary: "Out of the Box"

Tomorrow Has Arrived

The day dawns with a deal for Greece that is full of smoke and mirrors; lies and deceptions. It is a deal pretty much as expected and, as I have said before, now the realities are going to be confronted. Europe has spun the agreement and the Euro has rallied some and the S&P futures are up but the next few weeks, I am afraid, will hold some serious disappointments. The page turns today because now we are about to confront not what is told to us but the actuality of what has been presented to us and just what will happen as a result.

How many European Union officials does it take to change a light bulb?

None. There is nothing wrong with the light bulb; its condition is improving every day. Any reports of its lack of incandescence are an illusional spin from people that unfortunately know how to add and subtract. Illuminating rooms is hard work. That light bulb has served honorably, and anything Mark Grant says undermines the lighting effort.

The Smoke and Mirrors

The IMF has not yet stated what its contribution will be to Greece and will not, they tell us, until the middle of March so that we will not know until then the real size of the bailout. The much promoted $176Bn bailout may not be accurate if the IMF pulls back on their allocation.

The projections for the growth of Greece, even in the leaked document provided by Reuters, utilize assumptions that will not be met, which has been the case every time, each time, for the last two years so that fuzzy math is being touted once again and the new/new projections will, in my opinion, come nowhere close to the truth.

The IIF agreed to further cuts last night for private investors, which no one but they have agreed to, so that shortly we will see how many institutions go along with the scheme and how many will sue as a result of the forced haircut that cuts about 74% from Net Present Value. We will also see law suits in London concerning the $18Bn of Greek debt that is governed under British law which may have quite interesting results. The Troika’s projections rest upon a 95% participation by private investors and I think they are living in a dream state if this is their expectation. In a Reuter’s article this morning they report: "The 32 members of the IIF's larger creditors' committee had a least 44 billion in euros in residual holdings.” If this is correct then the IIF is only representing 12.2% of the Greek bondholders.

The ECB has swapped their bonds with Greece and taken a senior position to private bond holders clearly indicating that they can swap their bonds with a sovereign nation to change any clause they do not like and if they can do it with Greece they obviously can do it with any other nation so that we will soon see law suits challenging this operation. We may also see, as a result of this, some institutions not subject to European manipulation, selling their positions as they do not wish to be subordinated to the whims of the ECB. I would also make note that the ratings agencies may take due note of this action and might reduce the ratings of all of the sovereign nations in Europe based upon this action. In evaluating a sovereign there is credit risk and political risk and I assert that the political risk has now been greatly magnified.

The ECB tell us that they will give their profits on the Greek bonds bank to the European central banks except there are no profits, only severe losses presently, so that all of this talk of profits is really the expectation of getting their money back at maturity which is years away. Their claim in the Press is not just misleading but an outright charade of mis-direction.

Greece will shortly be placed into “Default” by S&P and Fitch which will trigger default language in all kinds of securitizations including Greece’s $90Bn in derivatives and may cause disgorgement from accounts that are forbidden to hold defaulted bonds.

After the country has been placed into “Default” the banks will soon follow and once again there will be all kinds of consequences in interbank lending, securitizations, collateral agreements et al from all of this.

The CDS contracts for Greece may or may not function as they stand but, as I am quite certain will happen, not enough bond holders tender their bonds for the new debt so that Greece will pass the “Collective Action Clause” which will certainly trigger CDS in my opinion and if not will show the fallacy of that market.

The structure of the deal puts the IMF/EU/ECB clearly in control of the finances of Greece so they have replaced some sort of Czar with the bureaucrats of the Troika and the country no longer will control its own finances as they traded away their sovereignty for cash. In fact, an escrow account will be set up for Greece which will be controlled by the Troika and Greece is being forced to change their Constitution pledging to pay their creditors before providing any money for the country. A quick study of the math reveals that Greece will get about 19 cents on the Dollar and the rest of the money is the sovereign nations of Europe paying back their banks with the money they have supposedly lent to Greece. Greece is now nothing more than a conduit for the nations of Europe to pay back their own financial institutions. 

Now we will see if the Parliaments in Europe will go along with this plan as many still have to approve it and a careful reading of the math involved here may be troubling for some governments especially Finland and the Netherlands.

We will also see, with Greek elections looming, how the citizens react to all of this either in the polling booths or in the streets as an additional $4Bn of spending cuts have been mandated by the Troika and they state that the money will not be paid to Greece until they are implemented which must be by the end of February.

The total outstanding debt for Greece will now rise to $1.270Tn as new debt pays off old debt in a country with substantial negative growth so that the real situation, regardless of what we are told, worsens.

In early May Greece faces its next bond payments so there may be a re-do for all of this in several months’ time.

If Greece is actually going to get the next round of the bailout then the other side of the coin is the increased debt being taken on by the other countries in Europe which could cause more downgrades as the new debt to GDP numbers are assessed.

“A sleight of hand is not magic; just a trick. It is amazing to me these days how proficient the EU and the ECB have become in turning tricks.”

-The Wizard

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knight99's picture

i am hearing the NET CDS on Greece will only be 2.8 billion approximatly. If this is the case not a big deal but I can't help to think this is not the case considering all the can kicking just to avoid a CDS trigger any input would be appreciated.

withnmeans's picture

A little off topic, I'm finding it strange that not only Lloyd Blankfein is quitting but others on the top of Goldman are stepping down. Hmmmm , something is up "or should I say down"

LawsofPhysics's picture

Only the morgue will survive this next financial crisis.  Actually I guess I could modify that, any entity with a lot of physical will ultimately survive the massive deflation then hyperinflation that will eventually occur.

economics1996's picture

Reminds me of the confederates celebrating when the shots were fired at Ft. Sumter. 

LawsofPhysics's picture

Certainly is very clear as to why JPM has been re-hypothicating anything in their vaults of physical value now doesn't it?

Mr Lennon Hendrix's picture

Gold, bitchez

Went vert to $1755 just now....I do want it to come down during the next two weeks though

redpill's picture

Bad boys bad boys

Whatcha gonna say

Whatcha gonna say when yo counterparty can't pay

caconhma's picture

Let us review the Greek situation.

Using the GM & Chrysler medicine, Greece lenders could forgive most of Greek debts and the Central Banks could just print more funny-money compensating Greek debt holders.

Greece will have a "clean" start and, without accumulating new debts, will solve its problems. After all, the Central banks are printing mountains of funny money every single day. However, this solution would drastically reduce the Zionist Banking Mafia strangulation and enslavement of Greek people. From the Mafia point of view, such solution is NOT acceptable.

ElvisDog's picture

The problem with your plan is that every other EU debtor nation - Spain, Italy, Portugal, Ireland, France - is going to want the same deal. I.E. instant hyperinflation.

Element's picture

"When you buy something that goes down in value immediately, that's bad debt ... If it has no potential to increase in value, that's bad debt." - David Bach, CEO Finish Rich Inc.

WonderDawg's picture

Uh, David, if you pay cash for it, it's a bad investment, not bad debt.

a growing concern's picture

Maybe he's tired of being the Gimp?

Vince Clortho's picture

Time to promote George Costanza to Senior V. P.

Watson's picture

Only if you did not arrange to take collateral as the trade moved in your favour.

Which may well have been true a few years ago (though through oversight/laziness and lack of imagination, rather than deep conspiracy).

However, do people really do new CDS business without (a pretty slick) collateral exchange process in place?

GeneMarchbanks's picture

'After the country has been placed into “Default” the banks will soon follow and once again there will be all kinds of consequences in interbank lending, securitizations, collateral agreements et al from all of this.  ...

Greece will pass the “Collective Action Clause” which will certainly trigger CDS in my opinion and if not will show the fallacy of that market.'

The fact that S&P and Fitch have to place anyone in the 'Default' category is revealing in itself. No market only market making and following the lead of the Banking Theocracy. Complete farce. Something is only so if the Chosen Ones say it is so. Otherwise keep waiting...

eddiebe's picture

Is anybody here as sick of hearing about greece as I am? Is this really the most important thing in the world? WTF

Shizzmoney's picture

Srsly.....its sad, but I am sick of seeing the headlines:

"Greece may default!"

"IMF/EU/Troika comes to agree on Greece"

"But wait, Greece owes MORE money after bailout!"

"EU/IMF/China/Unicorns may bail out Euro Zone"

"Germany says Greece owes even MORE money!"

and of course, the favorite:

"Greece is fucked"

Element's picture

let's not forget;


"Greek Parliament finally admits zerohedge has been right all along!"

bdc63's picture

YES!  I am TOTALLY sick of hearing about Greece ... its getting in the way of talking about Italy and Spain ...

Shizzmoney's picture

Very true.  Part of the reason Greece didn't want to default, IMO, is because its politicans didn't want to answer to the bankers/hedge fund guys who would have lost money.  So they threw their people under the bus to save that "embarrassment" (even thought we know what the true embarrassment is).

Italy/Spain are MUCH different as they owe way more money, and their bond spreads and yields have the chance of being so volitile, that it affects ALL markets..... not just EZ.

jcaz's picture

LOL-  thank you for being a perfect example of the problem, Ed.....

Go watch your Netflix if you don't like the tunes here.

SheepDog-One's picture

Well, Ive got to say Im with Ed, totaly sick of this 3 ring circus dog and pony show day after day for a year...meanwhile our own economy is in tatters and imploding fast. This is the worst diversion ever.

Moneyswirth's picture

Well this could make it the "best" diversion ever.  That is to say effective.

Nevertheless I agree 100%.  I'm sure the Obama administration is fine with an imploding Eurozone so long as it takes attention away from the straw house in a windstorm that is the American economy. 

a growing concern's picture

I think the contagion will bring a Greek collapse to our doorstep in a real hurry once the air oscillator and the excrement actually meet.

eddiebe's picture

Glad I made you laugh jcaz, and thank you for pointing out what my options are.

Unholy Dalliance's picture

Crikey! What is your real name - Rip van Winkle? Enjoy your snooze, did you?

Moneyswirth's picture

Yeah, talking about Greece sucks.  But it takes attention away from those other non-important issues like the social and economic collapse of the USA, impending war with Iran and/or Syria, etc. 

But to answer your question, the crisis with Greece and the Eurozone is the most important "thing" on this blog as it were.  If you don't like it, feel free to leave.



ElvisDog's picture

But in my experience we denizens of ZH are the only ones in the U.S. anyway that are even aware of the situation in Greece. None of my well-educated friends and colleagues are even aware of it or care about it if they are. The ZH community are definitely the only ones talking about Greece.

YesWeKahn's picture

I am still looking for the bullishness the ES index is princing in.

Mercury's picture

We may also see, as a result of this, some institutions not subject to European manipulation, selling their positions as they do not wish to be subordinated to the whims of the ECB. I would also make note that the ratings agencies may take due note of this action and might reduce the ratings of all of the sovereign nations in Europe based upon this action. In evaluating a sovereign there is credit risk and political risk and I assert that the political risk has now been greatly magnified.

That's what its all about.  Even if things are arranged so that CDS doesn't get triggered en masse this time and even if future CDS contracts are written to cover this kind of event, the risks/costs associated with buying Euro sov. debt just went up big time.

Even worse, those risks/costs aren't explicit or measurable but contingent upon the whims and expediencies of  whatever Eurocrats are in the room at any particular place/time.

Maybe they thought if it "worked" so well for Chrysler and the US capital markets it can work for Greece and the Euro sov. debt markets.

Commander Cody's picture

I wonder if there is any real capital to pay debts?

Caviar Emptor's picture

It's always easy to "live" in the theoretical world of concepts, visions, words and hubris.

Once you actually have to live by the sword, it's suddenly a different story. 

Greece should be a wake up call to all the other "Domino Countries" around the world: you could be next. And probably will. 

ballafun's picture

The best part, someone else will pay the price of mistakes/frauds being done by so called thinktank of EU. Anyways thats the norm in world anywhere. And biggies will make money, and none will bail out smallies

LawsofPhysics's picture

It looks to me like the "bailout" is all going to creditors. More debt, simply to service old debt.  Isn't this the very definition of a liquidity trap or capital malinvestment?  What am I missing here?

bdc63's picture

... you're not missing one darn thing ... unfortunately ...

Vince Clortho's picture

Greece and her people must fall in order to save the too big too fail bank cartel.

eddiebe's picture

Somehow I think this whole EU/Greek pony show (by design?) is sucking everyones attention away from issues that should really be looked at. Like depletion of resources, topsoil erosion, over fishing of the oceans, control over food grain seed, viral population growth, lack of accountability of our polititians..Who really gives a shit about wether greeks pay their taxes or not. Let them sort it out already, or not.

roccman's picture



but what happens to greece is the fix for the other problems


greece just happens to be the tip of the spear - a forced powerdown and subsequent killoff of the human project is the end game...and THAT solves the overshoot problem right quick.


when global commerce stops - because of a massive global default - the food and oil stop showing up at your doorstep...


you will be lucky to survive 30 days (i know - rambo types are good for 45 days)


in 6 months to a year when the human project is 10% of what it is now...the elite re-emerge from their bunkers - the goon sqaud scrapes the bodies off the sidewalks (renders each into 5 gallons of bio diesel) and the machine is spun up again for another 1000 years with a chipped surviving slave class doing all the work.


peak oil goes away...peak food...peak climate change...peak credit - all a thing of the past - no nation - states - just one big corporation...

ElvisDog's picture

Interesting conspiracy, except most of the so-called "elite" that I come in contact with are morons. They are pysociopaths (sp?) good at one thing, or just lucky in their birth. The smart people I know who could actually pull off such a plan are in the upper middle-class sphere. So the elite will have to sign some of them up to run things after the apocalypse.

roccman's picture

Perhaps, but they still have most of the world believing we landed on the moon - 911 was pulled off by some guy in a cave - and peak oil is several 100s of years out and by then we will have fixed the problem...because after all - we landed on the moon.

ElvisDog's picture

We did land on the moon you silly goose. It's pretty clear that "they" didn't make up the Space Shuttle program, so clearly we have both the ability to re-enter the Earth's atmosphere and the ability to send things up into space. The moon is only 250,000 miles from Earth. It's not that hard of a technical challenge, once you have demonstrated the ability to send a capsule into space and bring it back down again, to send something 250,000 miles away and land on the surface of a large, round object.

fiftybagger's picture

Ever landed a rocket in zero atmosphere?  Oops, try again.

DOT's picture

The tomorrows are arriving. Dusty death awaits.

youngman's picture

Where would we be today if we did not have the posibility of printing money?????  Makes one wonder..?????

tinsmith's picture

I love that, for the Nth time, the CNBC headline reads "Stocks to open higher on Greece deal". Awesome.