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Greek PSI Here We Come? Be Careful What You Wish For

Tyler Durden's picture


Via Peter Tchir of TF Market Advisors,

So it looks like we should get an announcement sometime today about the proposed Greek PSI deal.  Yes, proposed, not finalized.  Asides from the obvious fact that there will be limited or no documentation for the deal, we still have no clue who has agreed to what.

As far as I can tell, no one has given the IIF negotiators any binding power.  Obviously some of the institutions that the IIF negotiators are associated would have trouble not approving the "deal", but how many bonds do they really represent?

I think this will be a relatively small portion of bondholders and then the real game begins.  The carrot and stick that the EU and ECB can use with other holders and the desire to maximize profits (or minimize losses) on the other side.  So far, this news seems to be acting inversely to the "downgrades" price action, as early front-running is meeting sell the news.

If the terms of the deal being leaked are true, it will be extremely interesting to see what other countries do.  Not only will Greece receive a 50% notional reduction (except from the ECB and other "public" holders), but they will get very long dated money at very low rates.  Who woundn't want that?  Why should Spain both going through semi-legitimate auctions when Greece can get longer dated money at lower rates?  Why should Portugal or Hungary bother with painful steps to reduce debt when the alternative is spend more, reduce debt via restructuring, and get lower rates on that reduced debt?

I have to admit that there is one thing that strikes me as strange.  For a country that doesn't have a reputation for working excessively hard, the politicians seem more than happy to work whatever hours necessary when it comes to getting some free money.  It seems like most of their austerity votes come in the middle of the night, and here we are waiting for them to begin more negotiations at 7:30 pm on a Friday, but maybe that is just me being bitter?


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Fri, 01/20/2012 - 10:30 | 2080852 Irish66
Irish66's picture

30 year term?


"The new bond will likely have a 30-year maturity and a grace period of 10 years. It will have a stepped-up coupon structure which will average out in the area of 4 percent,» a banking official close to the talks told Reuters.

Fri, 01/20/2012 - 10:33 | 2080885 YBNguy
YBNguy's picture

Infinite term...


All greek has to do is allow ads compnaies/others to use the pantheon. Do I smell the next super sweet 16 MTV show being filmed there.

Fri, 01/20/2012 - 11:09 | 2080973 PolishHammer
PolishHammer's picture

Nah, sweet 16 must wait in line, the Pantheon is going to be rented out to Goldman exec's for their kid's batmizvah party.  Oyvay!

Fri, 01/20/2012 - 11:16 | 2081004 Mad Marv
Mad Marv's picture

The new national goal; Don't worry so much about productivity, just get the best subsidy possible from the global ponzi.

Fri, 01/20/2012 - 10:27 | 2080856 HoofHearted
HoofHearted's picture

Moral hazard, bitchez!

Fri, 01/20/2012 - 10:50 | 2080924 spiral_eyes
spiral_eyes's picture

print the money, enjoy the "benefits"... sustaining a bad system, sustaining high debt overhang, moral hazard, and an inflated money supply.

Fri, 01/20/2012 - 11:24 | 2081031 trebuchet
trebuchet's picture

+ adverse selection: those that buy insurance (CDS) are hte ones that need it the most......  the average strike rate is always gonna be too low. 

Any price rise in insurance rates doesnt remove the adverse selection problem - it triggers spikes. 


Thr only way for price discovery in opaque markets to deal with this is to price so high that demand dries up - or default/insurance triggers and we find out who was th wekest link or after a dry spell in the market, confidence returns when people look around and see noone went belly up. 

The danger with this is that it triggers its own demise, people otherwise ok ( if prices haddnt spiked) run into solvency issues for lack of liquidity. 

That almost happened when the bond markets froze - then the  central bank foreign currency swap deals and LTRO happened to prevent that unpleasent aspect of market price discovery. 

The result: we have liquidity but not price discovery. Now we might find a real event (no deal on PSI) that could make it all reappear.


Fri, 01/20/2012 - 10:28 | 2080857 agent default
agent default's picture

Yeah but just wait until all this crap is eventually used as the core argument for kicking Greece out of Euro.  PSI or not Greece will default totally.  And then everybody will say, sorry done all we could but you people are just useless.

Fri, 01/20/2012 - 11:13 | 2080989 Vaiman
Vaiman's picture

This is all nothing but orchestrated maneuvers.  The powers that be behind the political puppets are working their plan to gain control of the system in Europe through chaos (ie unsustainable debt loads etc)  so their plans for world govt move closer to completion.  As for the markets me thinks the institutions are moving them up on low volumes to sucker the retail investors in while they are still drugged on hopium and then bang...they will short the livin hell out of it.  Dirty rotten scoundrels they are!  

Fri, 01/20/2012 - 11:24 | 2081033 nowhereman
nowhereman's picture

Not a bad theory, now that they own Greece, the capital of the new world gov't could be Athen's, since they've got their man installed there already.

Or it could be Rome, They've installed their man there as well.  Both are good candidates "history of civilization" wise.

Fri, 01/20/2012 - 11:31 | 2081050 swoop72
swoop72's picture

The powers that be behind the political puppets are working their plan to gain control of the system in Europe through chaos (ie unsustainable debt loads etc)  so their plans for world govt move closer to completion. 


you sir, could not be more correct.

Fri, 01/20/2012 - 11:18 | 2081015 swoop72
Fri, 01/20/2012 - 10:27 | 2080858 Cast Iron Skillet
Cast Iron Skillet's picture

I would imagine that the politicians get paid at least double for overtime.

Fri, 01/20/2012 - 10:30 | 2080871 disabledvet
disabledvet's picture least indeed. Now where's my free coffee phuckers?

Fri, 01/20/2012 - 10:31 | 2080873 HoofHearted
HoofHearted's picture

I think they get to double-skip out on paying taxes, like the woman who owed euro47 million...

Fri, 01/20/2012 - 10:28 | 2080859 Dr. Engali
Dr. Engali's picture

Why in the hell would anybody lend these dead beats any money?

Fri, 01/20/2012 - 10:53 | 2080933 Red Raspberry
Red Raspberry's picture

So Goldman Sachs can make money.

Fri, 01/20/2012 - 11:08 | 2080970 trebuchet
trebuchet's picture

european markets today trading close correlation between euro, gold and ES - money moving into the dollar methinks. 


Thx to ZH and Peter i got cuatious today - those headlines re new talks look too phoney. 


Sarkozy pre weekend speeech : "eurocrisis is not over" 

MErkel " Enough funds in EU"

MErkels allies " we owe more to Greece" 

No statement from troika meeting/ no statment from Greek govt yesterday late night. 

Only a broad PSI IIF statement that we are on the right track will keep talking over the weekend

Greece had "hard deadline"  for the deal talks at 12 noon Greek time but somehow that got extended; they need the time to ratify the deal pre eurofin meetings kicking off on Monday. 

i think hedgies just called the troika/Merkozy bluff and put it this way, i wouldnt hold long over the weekend. im out

Fri, 01/20/2012 - 10:28 | 2080860 GeneMarchbanks
GeneMarchbanks's picture

'For a country that doesn't have a reputation for working excessively hard, the politicians seem more than happy to work whatever hours necessary when it comes to getting some free money.'

Some bias-free, fact based musings yet again, Pete.

Fri, 01/20/2012 - 10:33 | 2080880 disabledvet
disabledvet's picture

"cuz the guy upstairs with all the money said I'd be fired if I didn't. You got a better idea?"

Fri, 01/20/2012 - 11:27 | 2081038 Non Passaran
Non Passaran's picture

I like his style.

Bias-free? I don't like!

Fri, 01/20/2012 - 10:28 | 2080861 falak pema
falak pema's picture

reposted :


If the Germans had paid back to Greece the WWII damages they promised they would at reunification; Helmut Kohl himself made that promise and its never been kept, it would do a LOT to appease the Greek debt. Just saying, the uber alles economy has NOT kept its given word to Greece.

Fri, 01/20/2012 - 10:32 | 2080877 Seize Mars
Seize Mars's picture

If the Germans had paid back to Greece the WWII damages ...

I believe that war reparations are themselves acts of war. Just forget it and move on. Life goes on. Nobody owes you anything. If you want to retire, you need to do it on your own savings. You have no right to appropriate money from other people.

Fri, 01/20/2012 - 10:52 | 2080906 falak pema
falak pema's picture

Then why did the german head of state make that promise? Was he talking to the birds? Why did Germany payback France for WWI reparations its last installment  in 2008?

Your logic does not meet the facts of real life in relation to nation states, day to day dealings. Acts of war lead to treaties and payback clauses that have to be respected by successive governments. Even the Versailles treaty payback clause, that caused WW2, was respected in fact. Can't be more explicitly factual than that!

This last point replies to Bpom and Gosplan comments posted  above (or below).

Fri, 01/20/2012 - 11:02 | 2080952 trebuchet
trebuchet's picture

The great scheme for the Euro was based on  PIGS increasing wage rates while Germany invested their growing industrial capacity into the "less fortunate" south. 


Then reunifaction came along,,, German businesses invested in german speaking labour with the same cultural heritage on their doorstep being offered at lower rates. 

Germany destroyed Franch, Italian and spanish exporting capacity, capital in fact flowed from those countries into the New german project. 

The single market needed a fix from that point onwards, only no politician bothered to do so it was not in their interests at the time.


Fri, 01/20/2012 - 11:13 | 2080988 Seize Mars
Seize Mars's picture

Then why did the german head of state make that promise? Was he talking to the birds? 

Yes, he was. He's a politician who is a damned liar and thief. This is exactly the same as the politicians who were elected (year after year) in Greece, who said "if you vote for me, (my party, my regime, whatever), you can retire at age 50." They were lying also.

I wish it were so, but it isn't. The truth is, you work, you save, you retire. I work, I save, I retire. The capital that it takes to make a new company, build a bridge, retire, et cetera, does not come from borrowing money, nor does it come from extraction of another person's savings (reparations). It's a lie.

We've all been deceived. Here in the USA, in Greece, everywhere there is fiat money, some liar gets elected by promising benefits that come from debt instead of from savings.



Acts of war lead to treaties and payback clauses that have to be respected by successive governments. Even the Versailles treaty payback clause, that caused WW2, was respected in fact. Can't be more explicitly factual than that!

It's not right. You and I are not "entitled" to someone else's money. The fact that nation-states do it doesn't make it right. Someone in my city robbed a man. SHould I rob a man? Of course not. The element that makes this amoral (or immoral) is the element of coercion. try imagining a world where noone is coerced into anything. Now that's freedom!

Fri, 01/20/2012 - 11:53 | 2081106 falak pema
falak pema's picture

One man's freedom ends where another man's freedom begins in a state where there is rule of law and amongst people who sign written contracts. Its been that way in civilization since Lex Romana days. 

So when you are deemed aggressor, and you are defeated and you sign reparation, that is NOT coercion. And you've lost your (relative) freedom as a consequence of your own acts. 

We have a similar situation in Greece and its contractual obligations. If there is a voluntary deal there will be contractual agreement, not coercive, and THEY will be partially off the hook. Thats the whole spiel today that has the world by its short hairs.

Coming back to Germany and Helmut's promise : he represented a legally elected government in peacetime. Nothing coercive when he made that promise; it was to get his allies to accelerate their approval of GERMAN reunification, the BIG issue of HIS political life! So to him it was small fry, sweetening the Greek pill, to please the Euro crowd. Not to his successors, who forget that one man's or one nation's liberty ends...etc. 

Thats logic, thats also the rule of law, both contractual as well as criminal. Its been forgotten, and we would be the first to remind the Greeks if they forget it when the ink on this current one is signed, if it is signed. Just saying, that logic IS in essence our civilization and we can't walk away from it!

Fri, 01/20/2012 - 12:16 | 2081225 Seize Mars
Seize Mars's picture

If there is a voluntary deal there will be contractual agreement, not coercive...

I don't remember signing an agreement that somebody is entitled to 1/2 my income in a tax. Then, the "leader" makes deals based on revenue from my income, and I am obligated? No thanks. I decline. Wait, I can't decline? Ah, right, that's coercion.

...Helmut's promise : he represented a legally elected government in peacetime. Nothing coercive when he made that promise...

So if something is legal, it's right? How about the internment of Japanese Americans in WWII. That was legal. Don't forget, everything - and I mean everything - that the Nazis did was legal. Was it right?

...Thats logic, thats also the rule of law, both contractual as well as criminal. Its been forgotten, and we would be the first to remind the Greeks if they forget it when the ink on this current one is signed, if it is signed...

No citizen was consulted about Helmut's promise. If they decline, they are forced. That's coercion. It's wrong. I don't owe you anything. I didn't agree to it.

I promise, if you work, keep ALL of your earnings, save wisely and retire, all the hard feelings will vanish. No one to blame, no one whose money you need. Just your own.

Helmut's promise was an empty lie. You need to live your own life. Free.

Free from liars and thugs who take your income and then promise that you can have some "benefits."

Fri, 01/20/2012 - 10:43 | 2080902 bpom
bpom's picture

Wasn't the Germans having to pay back WWI debt what led to the election of the Nazi party?

Fri, 01/20/2012 - 10:50 | 2080917 GOSPLAN HERO
GOSPLAN HERO's picture


Germany experiences hyperinflation 1918 to 1924.

National Socialist Party begins to form in a big way in 1923.

Hitler begins rule in 1933.


Fri, 01/20/2012 - 11:09 | 2080971 Instant Wealth
Instant Wealth's picture

Lesson learned: never trust a german conservative.

Fri, 01/20/2012 - 10:28 | 2080864 disabledvet
disabledvet's picture


Fri, 01/20/2012 - 10:28 | 2080866 Stoploss
Stoploss's picture

Hurry!!!!! There's a line forming!!!!

Fri, 01/20/2012 - 10:29 | 2080867 oogs66
oogs66's picture

it's like our mortgage forgiveness plans....reward the failures and punish those who managed their finances properly

Fri, 01/20/2012 - 10:32 | 2080879 HoofHearted
HoofHearted's picture

So we should all say, "Screw it!" and stop paying the mortgages? Then maybe we can get a longer-dated mortgage with better terms. "I'll pay you 2 dollars per month from now until the year 10,115."

Fri, 01/20/2012 - 11:27 | 2080943 hedgeless_horseman
hedgeless_horseman's picture



So we should all say, "Screw it!" and stop paying the mortgages?...

You are close.  Either we all will stop paying the debts (default), as will Portugal, Ireland, Italy, Hungary, Spain, California, etc.  First drop over the dam, then the flood...

...or hyperinflation will make the principal amounts trivial.


Our worst nightmare is that we all just muddle through life as debt slaves, which is the path we are on now and the reoccuring wet dream of all bankers.

Fri, 01/20/2012 - 10:39 | 2080897 American34
American34's picture

No kidding, this is crap. My wife and I work hard to pay our mortgage and when I didn't have a job for a while my wife worked a crap load of hours to make up the difference. Yet what does our "Government" tell us? Thank you, good job. NO! They ask us for more tax money to give to the Section 8 housing across the street so that the people their can live for almost free and all at the cost of us hard working Americans. This has to stop.

Sometime soon all the people that actually keep America going and pay double income tax so the other half of Americans don't have to ARE going to stand up. Sometime soon the real Americans are going to take America back because all us hard working middle class Americans who pay for a huge chunk of the benefits for the poor and all those tax breaks for the rich and their corrupt corporations are finally going to get pissed enough to throw aside their petty differences and opinions and WORK TOGETHER to take back America. The REAL American's need to stand up and band together. PERIOD!

Fri, 01/20/2012 - 10:43 | 2080904 Dr. Engali
Dr. Engali's picture

I sympathize with you. However the problem is Americans refuse to do anything about it. They just take it. I find it incredulous myself.

Fri, 01/20/2012 - 11:04 | 2080958 American34
American34's picture

Then maybe we should do something about it.

Fri, 01/20/2012 - 11:10 | 2080979 adr
adr's picture

That is why the NDAA was passed. So we can't do anything about it. The USA is over. It is a dead country. You think it will exist in 25 years when every social program is bankrupt and blacks and hispanics outnumber white 5:1?

Fri, 01/20/2012 - 11:19 | 2081016 American34
American34's picture

I could care less about race or even country of origin! ANY hard working honest American who gives a crap enough to learn english is welcome in this country! This country really was built by immigrants, read your history books.

Race isn't the issue here!

The issue is corruption, the issue is robbing hard working Americans who care in order to give that hard earned money to someone who not only doesn't care but who is to lazy to work for it in the first place! The issue is a government that exists for its own benefit and that of the corporation rather than for the benefit of its own CITIZENS! THAT is the issue!

But your right, if NO ONE does anything about it, if there is no one left willing to put a little on the line then we are dead, America is done.

Fri, 01/20/2012 - 11:42 | 2081067 hedgeless_horseman
hedgeless_horseman's picture



So, what you are saying is we need another young Robert Mugabe?

Fri, 01/20/2012 - 11:16 | 2081001 nowhereman
nowhereman's picture

You want to do something?  It's an election year, do something.  Vote Ron Paul.  That should send the message you want, nicely I believe.

Fri, 01/20/2012 - 11:44 | 2081090 DCFusor
DCFusor's picture

But don't worry, any precinct that goes for Paul will simply lose all its ballots, like Iowa.


Which is still a good reason to vole for Paul as if they lose them all, they lose votes for the other losers too.

Fri, 01/20/2012 - 11:07 | 2080966 adr
adr's picture

I sympathize as well. The problem is good honest Americans know that if they step even close to the line the book will be thrown at them. All the while the scum get away with murder. Why? because they aren't afraid because they keep getting away with it. Sadly we missed our chance when Glenn Beck had 350k+ on the mall. If I was speakin I would have sent 100k to congress, 100k to the White House, and 100k to the supreme court and taken over washington. The demand would be to hand over the government to the American people and force a new election where any currently serving politician woul not be eligible. The gov would have had a choice, surrender or try and take out 300k American citizens. Sadly Beck did the wrong thing  and let all the people go home. Washington was scared shitless by that rally and now it will never be allowed to happen again.

Fri, 01/20/2012 - 12:29 | 2081268 Return2Sanity
Return2Sanity's picture


I sympathize with you and I also sympathize with those individuals in section 8 who would like to transition to self-sufficiency, because they are victimized by government policies too. The moment they successfully land their first part-time low-paying job, their assistance gets cut off, well before they can work up to a position that will pay all their bills.

Back in the old days, if you fell on hard times, you turned to churches or private charities, and they would help you out, but they would also put you to work helping others to the extent you were able. So, you learned some useful skills, met people in your community, and developed a good work reference in the process, and that made it easier to get back on your feet. Now, the government just gives out food cards and housing vouchers, and that makes it very difficult for people to work their way back to self-sufficiency. I know in serious downturns, churches and charities can get overwhelmed, but the government should be a back-up resource only in those instances, not a front-line resource to all people, all the time.

Mises Institute did a study that shows if you're a single mother with two kids, you will have a better standard of living by taking government assistance rather than working, unless you find a job that pays at least $40,000. I know sometimes people need help to get back on their feet, but we really need to change programs that reward people for not working because they are unfair to both taxpayers and to the needy (the study is here: ).


Fri, 01/20/2012 - 12:51 | 2081350 American34
American34's picture

I have seen this in person. I know several families who CHOOSE not to work because they "collect" more money from the Government by not working. The policies create a population that is dependent on the Government. HOWEVER, these "dependents" could still save some of those handouts to get back on their feet and then get back to work. ANY honest person who has a sense of self worth will work very hard to GET OFF the benefits. I would never feel right about being on unemployment for a year. I sympathize with those who are in trouble, however there is no excuse for those who do not even try.

Fri, 01/20/2012 - 12:31 | 2081274 Justinx34
Justinx34's picture

I agree - maybe we need a modern day FIGHT CLUB - we would not "physically fight" anyone but we would "FIGHT" the system and it would need to sort of work like the movie if you think about it much...

no money involved - all favors and we stick to a few simple ideas

Fri, 01/20/2012 - 10:30 | 2080870 Seize Mars
Seize Mars's picture

Look at it this way: imagine how productive and wealthy you could be with no government whatsoever.

Fri, 01/20/2012 - 10:33 | 2080881 unky
unky's picture

off topic: i think 2 things need an own topic: shutdown of megaupload and insolvency of germanys largest drug stores: schlecker.

Fri, 01/20/2012 - 12:06 | 2081180 Caggge
Caggge's picture

Megaupload shut down and Corzine walks free??  WTF?

Fri, 01/20/2012 - 10:34 | 2080883 Greater Fool
Greater Fool's picture

Anybody know offhand what percent of Greek tax revenues their debt service costs are?

Fri, 01/20/2012 - 10:34 | 2080887 Sudden Debt
Sudden Debt's picture

A fool is born every second and the Greeks only need 1 to sign a new credit line.


Fri, 01/20/2012 - 10:37 | 2080890 fonzannoon
fonzannoon's picture

details of this "deal" being leaked. Grace period of ten years on the principal...and yup it's voluntary.

Fri, 01/20/2012 - 10:44 | 2080909 Greater Fool
Greater Fool's picture

WTF good is this supposed to do?

Fri, 01/20/2012 - 11:47 | 2081100 Roy T
Roy T's picture

Papers over insolvency a little longer.

BULLISH!!!!  BUY! BUY! BUY!  <snark off>



Fri, 01/20/2012 - 10:47 | 2080916 falak pema
falak pema's picture

voluntary for some but for the SAba HF gang...?

Fri, 01/20/2012 - 10:51 | 2080927 firstdivision
firstdivision's picture

Is this why the rollover into lower beta stocks is occurring?

Fri, 01/20/2012 - 13:09 | 2081413 Stax Edwards
Stax Edwards's picture

BTFD fool!  This is your dip buy the high beta! Retail finally joining the party too, we got to go up if we want to stay airborne!

Fri, 01/20/2012 - 10:51 | 2080928 Fastback
Fastback's picture

Peter is exactly right. These greek / euro douche bags hide when it comes to austerity but run for the free ice cream. When are people going to say enough is enough! Oh yeah the whole system is corrupt. Strike that.


Fri, 01/20/2012 - 10:55 | 2080939 SheepDog-One
SheepDog-One's picture

We're in full-retard land now, no one ever has to pay back anything, free ice cream for all, and markets can never fall again because theres always endless free money.

Im just watching from the sidelines with some popcorn and a bottle of 151.

Fri, 01/20/2012 - 11:01 | 2080951 Dr. Engali
Dr. Engali's picture

I'm watching with an AR at my side an a bottle of Crown in my hand.

Fri, 01/20/2012 - 11:21 | 2081023 Instant Wealth
Instant Wealth's picture

.300 Weatherby Magnum and a bottle of mineral water ...

Fri, 01/20/2012 - 12:14 | 2081207 Babushka
Babushka's picture

Yes we can! Kick the can!

Yes we scam!

And Yes we scan!

We're bandito, Gangsterito

We peseto, pistoleto...

WE SOPEtto and PIPEtto

Fri, 01/20/2012 - 11:05 | 2080961 Snakeeyes
Snakeeyes's picture

70% haircuts are a scalping. My favorite is extending Greek debt to 30 years ... with a 10 year grace period!

In other words, "Death Takes a Holiday."

Fri, 01/20/2012 - 11:07 | 2080963 Alpacanio
Alpacanio's picture

I'm watching with a 30 06 and a Woodchuck Hard cider in my hand.

F'n retards, all of them!

Fri, 01/20/2012 - 11:07 | 2080964 youngman
youngman's picture

This is considered good news on the TV a Country defaults and that is good news....what am I missing here in today economics...????

Fri, 01/20/2012 - 11:13 | 2080985 youngman
youngman's picture

I am thinking to myself..if theres a 10 year holiday of bond payments...and you own some...that is going to hurt your income expectations and bottom line right...??? LOL..this is just so those Greek Pension funds are going to be hurting real bad I would assume....and some banks that own these pieces of crap....the dominos moved to a new table......same game..

Fri, 01/20/2012 - 11:47 | 2081103 ekm
ekm's picture

Greece at this point is IRRELEVANT. Who would be idiot enough to pour money back into stocks when Italy and the rest are about to be greeked?

No more little suckers left. The sharks are eating each other up. JPM ate MF Global? Who's next for dinner?

Fri, 01/20/2012 - 12:53 | 2081355 alwaystoolate
alwaystoolate's picture

Oh, c'mon why do you mingle Portugal and Hungary?

Instead of looking at the actual numbers (trade balance, budget deficit, foreign currency reserves...) you just repeat the lies and incredible desinformation spread by the mainstream press about Hungary like a parrot. 

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