Just Add Minotaur - The Greek Balance Sheet Labyrinth In All Its Insane Glory
Want to keep the minotaur perpetually lost? Forget the labyrinth: just let him loose in the epic disaster that is the Greek post-PSI balance sheet. Because anyone who still harbors quaint notions of pari passu sovereign debt is about to get an epileptic fit. As the BNP chart below shows, following the "successful" completion of the PSI, where we expect quite a few billion in UK-law holdouts to present a substantial headache to Greece as noted yesterday, the country will have not one, not two, not even three distinct debt classes of debt, but a whopping seven! Yup - one country, seven tranches of debt, in order of seniority: 1) EU-IMF Loans; 2) EFSF Loans; 3) SMP GGBs; 4) New GGBs; 5) T-Bills; 6) Old GGBs and 7) Other loans. So when that dealer sells you sovereign bonds from now on, we suggest getting some color on tranching, subordination, ranking, priority, security, guarantee, collateral, and in general everything else that is now forever gone in a post-pari passu world. And this is certainly not just Greece. With all of Europe undergoing the same stealthy "unsecured" debt-to-taxpayer higher lien restructuring, the same will happen in Portugal, Ireland, Spain, Italy, and eventually every other country, as the only real source of cash to keep the European once dream now nightmare alive are taxpayers, who directly have to fund out of pocket any hope of a residual welfare state... which incidentally at a hundred trillion or more in unfunded liabilities, is far more insolvent than Greece ever could be.
The seven different types of Greek debt in all their insane glory:
Then again, as we have long claimed, this is nothing more than merely the latest iteration of Wall Street's favorite pastime: 'Baffle them with bullshit' - which is to make things so complicated, people's eyes glaze over when they start analyzing from a bottoms up perspective. Of course, this is nothing new: this is precisely what has been happening for the past thirty years in high finance, as discussed in Shadow Rehypothecation, Infinite Leverage, And Why Breaking The Tyranny Of Ignorance Is The Only Solution. And because people happen to be lazy, nobody really feels like doing their homework until it is too late, at which point the screaming and fingerpointing (ahem rating agencies) begins.