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On The Greek "Glitch", Systemic Instability And Skating On Water

Tyler Durden's picture




 

By Bill Buckler of The Privateer

The Greek "Glitch"

Cast your mind back to the first half of 2007. In the US, Fed Chairman Bernanke was telling his colleagues that the sub prime mess was "grave but largely contained". Meanwhile, at the White House, President Bush was echoing his predecessor. When the first signs of the Asian Crisis of the late 1990s began to emerge, President Clinton called it a "glitch in the road". Mr Bush used the same phrase to describe the sub prime situation in 2007. Fast forward to the new potential financial crisis, this time in Europe. As far as the global markets are concerned, this is yet one more in the long line of "glitches".

The Asian crisis was not allowed to derail the global financial system. It was "fixed" by throwing a huge amount of money at it. The result was the "tech wreck" of 2000-2002. The sub prime mess in the US was not allowed to derail the global financial system. It was "fixed" by so much money that it made the Asian crisis bailouts look like a shower of loose change. The result was the global stock market swoon of late 2008 - early 2009. That one was "fixed" by trotting out the financial "nuclear option", the direct monetisation of sovereign debt by central banks which came to be known as "Quantitative Easing" (QE).

The current crisis is a sovereign debt crisis. This one is focussed on Greece and has a publicised deadline of March 20 - just over a month from now. On that date, the Greek government must roll over a "tranche" of debt coming due. The amount of this debt is 14.5 Billion Euros. In the context of the serial reliquification of the global system which has been the recurring theme of the last two decades, this sum is less than a rounding error. It is a sub-atomic particle in the structure of the global system.

That fact, in itself, should be enough to starkly show how fragile the entire system is. When the prospect of a nation being unable to roll over a paltry few Euros of maturing debt is enough to galvanise the entire financial world into monetary excess exceeding anything imaginable as recently as late 2007, one must conclude that the markets are skating on the thinnest ice in their entire existence. But skate they are.

 

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Sun, 02/19/2012 - 13:54 | 2175187 maxmad
maxmad's picture

Glitch, Bitch!

Sun, 02/19/2012 - 14:21 | 2175297 Eireann go Brach
Eireann go Brach's picture

But but Obama and Joe "the idiot" Biden were on Saturday Night Live last night and they said they will save the world!

Sun, 02/19/2012 - 17:57 | 2175891 Atomizer
Atomizer's picture

I didn’t see SNL, but can imagine the same thing would of happened. Roars of laughter

Gordon Brown 'saves the world

Mon, 02/20/2012 - 00:47 | 2176825 markmotive
markmotive's picture

Speaking of SNL..."Don't Buy Stuff You Cannot Afford"

http://www.planbeconomics.com/2010/09/08/classic-snl-dont-buy-stuff-you-...

 

Sun, 02/19/2012 - 15:03 | 2175432 DeadFred
DeadFred's picture

And pruralz would be Glitchez Bitchez

Sun, 02/19/2012 - 15:29 | 2175527 vast-dom
vast-dom's picture

Bitch, bitch.

Sun, 02/19/2012 - 19:19 | 2176053 Lord Welligton
Lord Welligton's picture

Bitchz, bitchz.

That's pluralz.

Sun, 02/19/2012 - 17:50 | 2175871 Sudden Debt
Sudden Debt's picture

You only need one soft patch on which you can slide and break you neck which can kill you or put you in a wheelchair sipping liquid food through a straw for the rest of you life.

Sun, 02/19/2012 - 19:20 | 2176057 Lord Welligton
Lord Welligton's picture

Correct.

And very deep.

Mon, 02/20/2012 - 00:17 | 2176786 Buck Johnson
Buck Johnson's picture

If it was just 14.5 billion they would give them the money.  The problem is when Greece defaults ALL THEIR BONDS ARE IN DEFAULT.

Mon, 02/20/2012 - 00:18 | 2176788 Buck Johnson
Buck Johnson's picture

If it was just 14.5 billion they would give them the money.  The problem is when Greece defaults ALL THEIR BONDS ARE IN DEFAULT.

Sun, 02/19/2012 - 13:55 | 2175191 AC_Doctor
AC_Doctor's picture

Let it burn, let it burn, let it burn!

Sun, 02/19/2012 - 13:56 | 2175196 maxmad
maxmad's picture

Cease fire!  Let them burn!

Sun, 02/19/2012 - 14:03 | 2175224 GeneMarchbanks
GeneMarchbanks's picture

Assuming you still believe in 'markets'.

Sun, 02/19/2012 - 14:05 | 2175231 Conrad Murray
Conrad Murray's picture

"As for financial markets, we have come full circle to the concept of financial fragility in economies with massive indebtedness. All too often, periods of heavy borrowing can take place in a bubble and last for a surprisingly long time. But highly leveraged economies, particularly those in which continual rollover of short-term debt is sustained only by confidence in relatively illiquid underlying assets, seldom survive forever, particularly if leverage continues to grow unchecked" - This Time Is Different, Reinhart and Rogoff

Sun, 02/19/2012 - 14:10 | 2175255 LawsofPhysics
LawsofPhysics's picture

Bring on the jubilee and let's find out preciselt what the value of everyone's labor really is.

Sun, 02/19/2012 - 14:13 | 2175262 GeneMarchbanks
GeneMarchbanks's picture

Massive indebtedness? It's called credit. We're credit worthy cause we're 'credible people mmmkay?

Sun, 02/19/2012 - 14:13 | 2175265 dracos_ghost
dracos_ghost's picture

The current crisis is a sovereign debt crisis. This one is focussed on Greece and has a publicised deadline of March 20 - just over a month from now. On that date, the Greek government must roll over a "tranche" of debt coming due. The amount of this debt is 14.5 Billion Euros. In the context of the serial reliquification of the global system which has been the recurring theme of the last two decades, this sum is less than a rounding error. It is a sub-atomic particle in the structure of the global system.

With the utter incompetence of the ruling elite on this trivial amount, I can't imagine the sheer terror when the rest of the PIIGs start turning on the bbq spit.

Sun, 02/19/2012 - 14:24 | 2175309 Conrad Murray
Conrad Murray's picture

That's all this is about. They don't give a shit about Greece. They're buying time to come up with a plan, any plan, to keep the game going when the rest come calling.

Sun, 02/19/2012 - 14:50 | 2175382 Kali
Kali's picture

What a farce this all is.  Anybody who is paying attention knows it's all bullshit.  How much over can it be when CDS's won't pay out til you define at what percent a default is a default and whether one participates willfully or not? That is, if Goldmanites "appointed" to  run Italy and Greece,  MFG , or for fuck's sake, when Hankie Pankie held a gun to Congress' head and made them "revote" to get the spigots turned on weren't clues enough.

I am sick of observing/discussing all the finer little turds that are part of the toilet bowl filling shit fest we are all standing up to our necks in. Let the Grand Clusterfuck begin already! My sanity and good humor wear very thin.

Mon, 02/20/2012 - 02:26 | 2176912 StychoKiller
StychoKiller's picture

When Kali gets upset, blood flows and heads roll!  ALL hail Kali!

Sun, 02/19/2012 - 14:59 | 2175419 SilverDoctors
SilverDoctors's picture

The US is Greece times 100.  As soon as the Euro situation is resolved one way or another, we're in for a world of hurt here in the US. 

Sun, 02/19/2012 - 16:01 | 2175629 Matt
Matt's picture

Because just like Greece, America has no way to create more money.

Sun, 02/19/2012 - 17:51 | 2175876 Sudden Debt
Sudden Debt's picture

Because the US can print all the money they want and don't see the need to cut back.

A 200 billion savings over 10 years needs to be debated for over 2 years. Printing 2 trillion only takes a weekend.

Sun, 02/19/2012 - 15:08 | 2175448 ekm
ekm's picture

I think the ice is cracking. A repeat of 1987 is looming quickly.

3000 dow points in two days anybody?

Are you ready?

Sun, 02/19/2012 - 17:28 | 2175833 Non Passaran
Non Passaran's picture

Sounds good to me!
Or maybe I should as some TZA to my mix?
3K down in a day would make my day!

Sun, 02/19/2012 - 17:54 | 2175878 Sudden Debt
Sudden Debt's picture

The ice ain't cracking. It's just summer starting early.

Sun, 02/19/2012 - 15:34 | 2175515 resurger
resurger's picture

Tyler i read an article on Bloomberg which said that if Greece defaults, expect the US markets to drop by 5% only?

I trust the source..

/s

 

Sun, 02/19/2012 - 17:55 | 2175883 Sudden Debt
Sudden Debt's picture

When bear sterns went bankrupt they thought it was all priced in and exagerated.

It will be arround 5% the first week, a 1% rise followed by a 25% drop.

Sun, 02/19/2012 - 15:40 | 2175570 LookingWithAmazement
LookingWithAmazement's picture

What does our friend Mish note on the Greek default? "There are only $3.2 billion or so Net CDS Contracts still floating around, a trivial number these days."

A lousy 3.2 billion. Indeed, Total Collapse. Whoohahaha! Greek default will be the greatest non-event ever. Told you sooooooooo!

http://globaleconomicanalysis.blogspot.com/2012/02/greek-cds-to-trigger-in-march.html

And please check out Mish' included link (below). It states: "What does all of this mean? Simply that Greek sovereign CDS exposure is too small to be much of a factor in the Greek drama that is currently being played out." 

Bring it on, that "Armageddon". Whoohahaha!

http://thedollargame.wordpress.com/2012/02/18/what-isda-got-right-and-wrong-about-greek-cds/

Boring world we live in.

Sun, 02/19/2012 - 17:26 | 2175829 machineh
machineh's picture

One detects a certain note of sarcasm in the esteemed contributor's post. But maybe Mish isn't so off base.

Greek bond yields over 600% indicate de facto default already. Meanwhile, stocks are at 3-year highs. What does this mean?

Apparently, that it's nearly irrelevant whether (1) PSI-plus-large-haircut goes through; or (2) Greece simply stops paying.

In Case (1), some European banks will have to recapitalized, plus Greece's bailout funds must be printed or borrowed. Case (2) -- same result, except the Greek bailout funds can simply be handed to banks directly, withoout using Greece as a conduit. 

From a bankster POV, the distinction between Cases (1) and (2) is trivial. Meanwhile, the equity market assumes another blast of coordinated official bailout liquidity will have the same effect on stocks as in previous financial crises.

It's enough to make you puke. But the bankster/fiat scam does not end until NO sovereign can borrow anymore. As ol' Hank Williams used to say, 'THEY WIN AGAIN.'

Sun, 02/19/2012 - 17:28 | 2175836 Non Passaran
Non Passaran's picture

+1

Sun, 02/19/2012 - 23:15 | 2176664 jeff montanye
jeff montanye's picture

it's not just greece by itself.  it's the bad example it sets for the other children.  you let one of them get away with it and before you know it they're all on the backs of motorcycles in those short skirts ....

Sun, 02/19/2012 - 15:48 | 2175594 slewie the pi-rat
slewie the pi-rat's picture

re-fi the entire ponziPryramid and people will think it is much safer to "invest"

"backstop" insolvency w/ mark2MAD

i, also, have marvelled at the amount of archetypal clowning around v. the amount of actual debt involved.  why not just write a check and clear this up?

the "reason" is that the books are cooked in layered fraud a'la bankster "securitization" and "insurance"

faustOnWheels

no pirate in his right mind would believe that we needed a 30% increase in "money" over 2 years to handle "greece"

or even a privateer, with lettre de marque

and a few extra flags...L0L!!!

and "greece" may still hold a few cards of its own, too, eh?  now that con-fidence is restored to the wwfiatSystem.con

thank goodness for that, eh, robo_T?

Sun, 02/19/2012 - 15:51 | 2175603 SamThomas
SamThomas's picture

"But skate they are."?   Wha?  Huh?   What kind of English is that?   Try "But skate they do."  

Sun, 02/19/2012 - 16:30 | 2175702 machineh
machineh's picture

"Skating on doo-doo," isn't it?

Sun, 02/19/2012 - 16:36 | 2175714 Samsonov
Samsonov's picture

The expectation here on this site is that you will do your own editing.  Who's got time for punctuation and coherence when the world is going to shit?

Sun, 02/19/2012 - 18:07 | 2175912 Atomizer
Atomizer's picture

But, but.. The grammar police industry is still a thriving employment industry that hasn't been outsourced yet. LOL

Sun, 02/19/2012 - 22:40 | 2176594 Stack Trace
Stack Trace's picture

It has Ben outsorczed... Thz kame bak from India.

Sun, 02/19/2012 - 23:20 | 2176672 jeff montanye
Sun, 02/19/2012 - 19:02 | 2176007 The Alarmist
The Alarmist's picture

Probably just an auto-correct thing, no?

Sun, 02/19/2012 - 16:15 | 2175667 jmc8888
jmc8888's picture

As the situation progresses, monetary aggregates aka bullshit fraud becomes even more finicky and panicky.  Easier and easier to trip downwards 'requiring' more and more money to 'reinflate'...and much more physical economic sacrificial destruction.

Our choices are....American Credit System with a focus on a physical economic recovery, or British Imperailism to temporarily keep afloat the bastard monetary system through printing, which leads to wars, strife, nuclear exchange, etc.

What we really have is two sides of the 'ideology' rubbing up against each other.  They can't 'print' this because the inflation signal it'll send can unwind everything (even if not Greece itself, the equivalents of everyone elses within the system following suit).  If they don't print, then it can unwind everything. When it 'pops'...or the realization of the worthless is uncovered by some of the sheeple, no one wants to have their finger on the print button, until someone has pushed it or a situation of collapse gives 'cover' to the printers.  Make no mistake they'll print to the moon, but the person that pushes us over the edge is going to have some 'splaining to do (in ricky ricardo's voice).  So for the fear of being the 'one' and for being the 'one' who gives everyone else the inflationary 'idea' that can be chosen as a piss poor, but better than the alternative, they will squabble over what seems like 'nothing' in a market of quadrillions of fraud.  They will risk the 'deflationary' spiral because they are boxed into a corner for now.   If one occurs, they'll print even more, and of course, the focus of it, will be on increasing the bullshit monetary aggregates. 

So they risk everything by printing and by not printing.  Neither way gets us out of moentary bizarro world where worthless fraud is inflated with printed dollars at the expense of the physical economy...let alone the people.   There is no answer to the problem of monetarism that comes from within monetarism (the monetary system).  Just the plans created from toddlers scribbles also known as ANY school of monetarism and what they prescribe as a 'remedy' to a 'manufactured' crisis of monetarism and it's effectual follies.

Glass-Steagall

 

Sun, 02/19/2012 - 18:59 | 2175999 flyonmywall
flyonmywall's picture

I give you the new kings of Europe, the European Commision.

When do we find out the king has no clothes?

As soon as a bunch of hedge funds take their money (what's left of it), and go home cuz they don't wanna play no more.

Then we find out how tough the market really is, and what rising interest rates do to it.

 

Sun, 02/19/2012 - 19:03 | 2176010 The Alarmist
The Alarmist's picture

So, uh, Europe is saved [again]? Risk on on Monday?

Sun, 02/19/2012 - 23:39 | 2176713 MinnesotaMD
MinnesotaMD's picture

Risk on. Does intrade have a counterparty to my New Dark Ages bet?

Sun, 02/19/2012 - 19:12 | 2176034 Fix It Again Timmy
Fix It Again Timmy's picture

The financial system is twisted and contorted in so many ways, who knows what the outcome will be.  We will have an outcome, won't we?

Sun, 02/19/2012 - 23:09 | 2176651 MinnesotaMD
MinnesotaMD's picture

Central banks are a one trick pony. Judging by how many fevered minds they have created, including my own BTW, I would diagnose them with Strep Meningitis.

Mon, 02/20/2012 - 04:29 | 2176990 Sandmann
Sandmann's picture

Der Zauberlehrling  is the German story known as The Sorcerer's Apprentice.  It is the best description of current times. These men have only a vague understanding of the forces they have unleashed and are desperately trying to control the situation by controlling perceptions of the situation. They are simply not intelligent enough to know that the problem is growing exponentially and will swallow all matter. It is exactly The Chernobyl Syndrome where they have an understanding of the technology but only a vague grasp of how to keep the beast caged and none at all of how to get the beast back in the cage.

Mon, 02/20/2012 - 13:23 | 2177873 3FrenchHens
3FrenchHens's picture

Indeed, Bank & govts skating, blades fly off skates, and we ALL fall through ice... skaters, spectators, AND the sheep and ostriches.  Gives new meaning to 'figure' $kating...

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