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The Reporter Is Either Wrong Or This Is A Bad Deal For Greece

Tyler Durden's picture




 

Via Peter Tchir of TF Market Advisors,

 

If the ECB switches 50 billion of old bonds for 50 billion of new bonds, what does Greece get?  No notional reduction. Possibly a reduction in interest payments but that depends on the coupons on the bonds the ECB owns. The new bonds allegedly have some covenants and possibly other projections for the bond holders. That is a negative for Greece - they can default on these old bonds and the ECB can't do much about it.

Maybe the reporter is wrong, but this is a good deal for the ECB, marginal for Greece, but does make it easier to jam holdouts. They can default on old bonds or retroactively CAC old bonds and the ECB won't be affected.

Will Greece agree to this?

If the ECB is counting the difference between purchase price and par as profits - then it is printing money. Maybe that is enough to get the market higher - a clear sign that ECB is printing.

It is possible that all they are considering as "profit" is interest they have been paid and it is possible that the ECB will exchange their bonds based on purchase price, giving Greece some notional reduction.

This announcement is either marginally good or marginally bad depending on the details. It is not great or a game changer - except maybe the money printing angle.

As Credit Suisse noted this morning:

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.

 

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Thu, 02/16/2012 - 13:34 | 2166322 GeneMarchbanks
GeneMarchbanks's picture

'If the ECB switches 50 billion of old bonds for 50 billion of new bonds, what does Greece get?'

Uh, a chance to revise simple arithmetic?

Jay-Zeus, is this really a topic now? You people are bored.

Thu, 02/16/2012 - 13:35 | 2166327 Chuck Bone
Chuck Bone's picture

Tyler, any comment on this report? http://hat4uk.wordpress.com/

Thu, 02/16/2012 - 13:37 | 2166334 trav7777
trav7777's picture

Anything which prolongs the inevitable is good for Greece.  It keeps them lounging in cafes pretending to work for a little while longer

Thu, 02/16/2012 - 13:58 | 2166382 Azannoth
Azannoth's picture

Otherwise the Greeks would have stormed the Parliament long ago and hung their elected officials, those protests and such are just a way for them to burn off the calories so they don't get too fat while not working

The Greeks know that if they had a real Revolution and cut them selves off from the EU all the subsidies would be gone and they could never get the Germans to pay for their debt and that they would have to actually live on what they produce(at least for a few years), they are only protesting better deals so they can get others to pay for them, they know full well that they are not the victims in any of this but the beneficiaries

Thu, 02/16/2012 - 14:34 | 2166571 Manthong
Manthong's picture

"the Greeks would have stormed the Parliament long ago and hung their elected officials"

You've got to have some patience and faith in people..

and God only knows how hard the politicians have worked to earn their ignominious fortune.

Thu, 02/16/2012 - 13:38 | 2166339 SheepDog-One
SheepDog-One's picture

He already did, he says its 'Debkaesque'...Im more inclined to believe its exactly right myself.

Thu, 02/16/2012 - 13:46 | 2166371 Chuck Bone
Chuck Bone's picture

I see that now, thanks. Any particular reason why it's BS? Or is it just unconfirmed by ZH sources.

Thu, 02/16/2012 - 13:52 | 2166391 blu
blu's picture

Off hand, I would say that the BS part is that someone has a written report of a plan.

None of this will ever be in writing evar.

There is probably a plan though. There are probably 50 poeple in the world who know the plan, and they are not saying jack.

Thu, 02/16/2012 - 13:37 | 2166337 The Watchman
The Watchman's picture

Greece is the word... Greece is the word... Greece is the word... Greece!

Thu, 02/16/2012 - 13:50 | 2166381 SilverRhino
SilverRhino's picture

+1 .... that is so wrong.

Thu, 02/16/2012 - 13:34 | 2166323 Silver Bug
Silver Bug's picture

Greece needs to flat out default. That is the only thing that is going to save them in the long run. They need to preserve their assets.

 

http://ronpaul2012blog.blogspot.com/

Thu, 02/16/2012 - 13:38 | 2166343 agent default
agent default's picture

Greece will be forced to default or left to default, after Germany has a firm grip on Greek assets.  This thing is not a rescue, it is the leveraged buyout of a country, funded by its people.  The treasonous behavior of Greek politicians is obvious,what is stunning is the stupidity and passivity of the Greek population.  The more this can is kicked, the more convinced I am that the Greeks deserve to get fucked over.  

Thu, 02/16/2012 - 13:51 | 2166384 pods
pods's picture

Careful, those words will be used against you when this storm comes ashore at your locale.  

pods

Thu, 02/16/2012 - 13:57 | 2166406 agent default
agent default's picture

Nah, we are too big to bail out, and the entire world knows we are too busy playing with our iPads to give a damn anyway.

Thu, 02/16/2012 - 14:57 | 2166647 LouisDega
LouisDega's picture

I just bought one the other day. I figured i would try one before my inevitable death. Very nice toy. 

Thu, 02/16/2012 - 14:38 | 2166586 slobbermut
slobbermut's picture

What do you mean passive?  Last I heard there were like 150 buildings on fire.  Do you want them to actually get some weapons and actually start gunning down the police in the streets?  They are being sold out...many there are aware of what is happening.

Thu, 02/16/2012 - 15:50 | 2166847 zuuuueri
zuuuueri's picture

almost all the buildings that were burned were abandoned or unoccupied. the fires were organized, not a spontaneous mob, but a propaganda play.

the politicians here seem to genuinely think they can go a couple more rounds of squeezing blood from the people.

 

the attitude of the common people (not the ones you see in unions or political party- sponsored demonstrations) is getting closer and closer to the point where a country is in danger of open dictatorship.

 

Thu, 02/16/2012 - 13:39 | 2166345 SheepDog-One
SheepDog-One's picture

Exactly right, for the love of GOD just DEFAULT already you pinheads!

Thu, 02/16/2012 - 13:39 | 2166346 Shizzmoney
Shizzmoney's picture

Greece needs to hit up Wu-Tang Financial.  They'll tell those ECB suckers whats up!

http://www.youtube.com/watch?v=4ZiBEV3UIrU

Thu, 02/16/2012 - 13:44 | 2166361 SheepDog-One
SheepDog-One's picture

You need to diversify yo bonds, bitchez.

Thu, 02/16/2012 - 13:36 | 2166329 ZeroPower
ZeroPower's picture

Not believing this move higher right now. MAIN hasn't moved as far tight compared with XOver though you do see some sovereign CDS tighten. As for volatlity, VIX options (March) were getting bid monstrously this morning, the 26/28 strangle was out at $7! 

Thu, 02/16/2012 - 13:37 | 2166338 SheepDog-One
SheepDog-One's picture

WHAT? The rumor is wrong, or its a bad deal? No, we simply cant have that, the clouds of hopium smoke are hanging thick over world markets today.

Thu, 02/16/2012 - 13:39 | 2166347 blu
blu's picture

This happy talk about solutions is so much like the run up to the Lehman BK that it is hard to hear it and not totally freak out.

It means Greece is going to default. Probably -- in five mintues. It will be disorderly. Nobody cares because the Eurozone biggies are firewalled against it.

Time to let it rip, I can hear them saying.

Thu, 02/16/2012 - 13:42 | 2166357 SheepDog-One
SheepDog-One's picture

Personally, I get the clear impression these people are stuck and dont know what to do now except kick the can 24 more hours. I think they had this plan of 'domino cascading bankruptcies' to bring about the 1 world govt/bank/currency, and are hard stuck against the wall and have no clue how to proceed as their plans have failed. Simply none of it makes any sense. Theres NO point in doing all this day after day!

Thu, 02/16/2012 - 13:48 | 2166375 blu
blu's picture

We need the deer-in-the-headlights on all these "Greece solution" stories. I swear, the news out of Europe is now just so much gibber-jabber and mouth noise.

Thu, 02/16/2012 - 13:49 | 2166378 alien-IQ
alien-IQ's picture

the biggest intellectual and emotional mistake you can make would be to underestimate "them".

they are many many things...but stupid is NOT one of those things. that's what makes them dangerous. intelligence without conscience is something to be feared. it is the most destructive possible form of evil.

rest assured, they have a plan and this is part of it. all angles have been covered over and over again. they have a plan A and B and C and D etc etc etc etc all the way to Z and beyond.

don't underestimate these fuckers.

Thu, 02/16/2012 - 13:55 | 2166403 resurger
resurger's picture

“By way of deception, though shalt wage war”

That's how they roll AIQ

Thu, 02/16/2012 - 14:04 | 2166440 SheepDog-One
SheepDog-One's picture

Theyre not so great and smart, theyre just people, and frequently thruout history have made huge blunders....their LAST attempt at all this was thru the League of Nations, WW1 and WW2 etc, but that plan flopped. They keep making attempts to form a PRISON PLANET, over the people but keep forgetting people just wont stand for it. Thats where they are now, another failed attempt.

Thu, 02/16/2012 - 14:22 | 2166502 slewie the pi-rat
slewie the pi-rat's picture

as balzac & dickens and more recently tDurden have taken great pains to "document" this is bigBiZ and not pointless to those in the "industry", sheeple-dawg.  finiMinis were made for this shit!

they can't 'allow' the BKs to cascade too fast, it might fuk up summa their other playZ?

imo, this IS the wall0'worry regarding which robo_T is now in complete fuking hysterics!

place yer 'bets', BiCheZ! 

Thu, 02/16/2012 - 13:43 | 2166360 alien-IQ
alien-IQ's picture

be it good or bad, TPTB have managed to utilize this to erase all USD gains and stock market losses from yesterday...and then some.

This is not a market, it's a fucking circus...with evil clowns.

Thu, 02/16/2012 - 13:44 | 2166367 SheepDog-One
SheepDog-One's picture

Yea and whats the point to any of it? Just cat and mouse BS at this point.

Thu, 02/16/2012 - 13:52 | 2166392 alien-IQ
alien-IQ's picture

wealth is being transferred and perceptions are being managed. that's the point of their game. control.

Thu, 02/16/2012 - 14:05 | 2166443 SheepDog-One
SheepDog-One's picture

Wealth is not being transfered, there is no wealth at all. The only thing that makes any sense is theyve tried yet again to grab the planet for themselves and enslave the people, but it will not ever work. Theyre stuck, again.

Thu, 02/16/2012 - 13:53 | 2166399 resurger
resurger's picture

to be honest, i want this market to climb higher with their bullshit..

Imagine TVIX at $7.. what a great opportunity for a great slaughter

Thu, 02/16/2012 - 13:51 | 2166383 JR
JR's picture

It is not ‘goose-stepping’ Germans “who will rule the New Europe”; it will be, “obviously, the private European banks and Goldman Sachs.” That’s how Dr. Paul Craig Roberts sees it..

Germany is now in a life and death struggle with New York-based finance, says Robert Hickson, and as of now it looks as if New York is winning: He quotes Roberts:

On November 25, two days after a failed German government bond auction in which Germany was unable to sell 35% of its offerings of 10-year bonds, the German finance minister, Wolfgang Schaeuble said that Germany might retreat from its demands that the private banks that hold the troubled sovereign debt from Greece, Italy, and Spain must accept part of the cost of their bailout by writing off some of the debt. The private banks want to avoid any losses either by forcing the Greek, Italian, and Spanish governments to make good on the bonds by imposing extreme austerity on their citizens, or by having the European Central Bank print euros with which to buy the sovereign debt from the private banks. Printing money to make good on debt is contrary to the ECB’s charter and especially frightens Germans, because of the Weimar experience with hyperinflation.”

“Jewish finance in New York decided to pull out the club known as ‘history’ to beat Germany into submission once again.” As Roberts put it: "Germany, which has been browbeat since its defeat in World War II, has been made constitutionally incapable of strong leadership. Any sign of German leadership is quickly quelled by dredging up remembrance of the Third Reich.”

Says Hickson: “Leadership in this instance meant that Germany was insisting that the bankers (i.e., Goldman Sachs) who sold Greece toxic financial instruments, which the previous Greek government used to disguise the real magnitude of her indebtedness, take a 50 percent haircut on their bonds. The idea of Germany insisting on shared hardship as the solution to the debt crisis was intolerable to New York’s Jewish banking elite, hence the attack by NPR (by Elizabeth Beardsley in late 2011 on German warmongering and ‘talk of a Fourth Reich’).”

Thu, 02/16/2012 - 14:06 | 2166446 GeneMarchbanks
GeneMarchbanks's picture

' “Leadership in this instance meant that Germany was insisting that the bankers (i.e., Goldman Sachs) who sold Greece toxic financial instruments, which the previous Greek government used to disguise the real magnitude of her indebtedness, take a 50 percent haircut on their bonds.'

German hands are tied. Anything they attempt will get them massacred by the corporate media no matter the intention. Germany has been castrated. Their tool-box is limited and they can be easily demonized.

Thu, 02/16/2012 - 14:32 | 2166563 JR
JR's picture

Exactly. The manipulation of German guilt for financial advantage.

Thu, 02/16/2012 - 14:38 | 2166587 GeneMarchbanks
GeneMarchbanks's picture

Luther's revolt come full circle?

Bad jokes aside, I think the undoing of Germany will be their severe Action Bias. Hope I'm wrong.

Thu, 02/16/2012 - 14:56 | 2166656 JR
JR's picture

We’re all on the road to Serfdom if we don’t turn around and refuse to participate in the Lie! It won't be easy. As Roberts said:

“The European Union, just like everything else, is merely another scheme to concentrate wealth in a few hands at the expense of European citizens, who are destined, like Americans, to be the serfs of the 21st century.

“Jacques Delors, a founder of the European Union, promised the British Trade Union Congress in 1988 that the European Commission would require governments to introduce pro-labor legislation. Instead, we find the banker-controlled European Commission demanding that European labor bail out the private banks by accepting lower pay, fewer social services, and a later retirement.”

Roberts’ 2011 article is worth the reread:

http://www.infiniteunknown.net/2011/11/27/dr-paul-craig-roberts-bankers-have-seized-europe-goldman-sachs-has-taken-over-failed-german-bond-auction-orchestrated/

Thu, 02/16/2012 - 14:09 | 2166475 Azannoth
Azannoth's picture

True Germany is not allowed to have an Independent political system or to protect it's own National Interests, it has been made to a whore of the International Jewry and get's bitch slapped every time it tries to speak up, but Germans are getting mighty tired of this and I think the next generation will not be so tolerant of it's own abuses

Thu, 02/16/2012 - 14:09 | 2166476 falak pema
falak pema's picture

Goose-stepping jewish bankers, that is news...Will it reach Saudi Wahhabites and those who don't like jews doing any other dance than swinging at end of rope?

This whole stand off is going Medieval to the point of both sides singing "God wills it!". Awesome regression. If only they bought my book they would see the light! 

Pech Souleila: Sidi Kafir By Falakpema

Thu, 02/16/2012 - 14:43 | 2166607 JR
JR's picture

I like your book bio and for those who might have missed it:

Falakpema is an international traveller and business executive with multicultural roots. His personal experience has given him a vivid insight into the working mind of those who currently rule the world as harbingers of a new world order that transfers inordinate riches to a new global oligarchy at the expense of the silent majority of middle-class people, the very backbone of democratic society. A new form of feudalism, moving force of global, transnational, financial power-play, makes historic reference to that bygone age appear very relevant to understanding current times.

 

Thu, 02/16/2012 - 16:08 | 2166925 falak pema
falak pema's picture

You know the worst nightmare of a would-be author is to hear a has-been reader say :

"The best part of your book was your bio"....

Now you can bury me six foot under!

Fri, 02/17/2012 - 14:50 | 2169921 JR
JR's picture

Whoa, Falak, don’t bury yourself without cause. I meant to compliment. Your bio substantiates your book and entices me further to read the book.  I was impressed by your background, that’s all, and thought others would be also. In fact, intrigued by some of your posts here, I earlier had sought out information about you on the internet and was happy to find this nugget.

Dare I say I am also intrigued by your Mission Statement in that I am currently reviewing Solzhenitzhen’s chapter on “The Blue-caps” in The Gulag Archipelago and his inquiries about the ideological barriers against setting any limits to moral evil, i.e., an ideology that allows some men to kill without remorse by the millions without setting any limits to moral evil such as in the various forms of Bolshevism, Zionism, Nazism – where vice is not punished but triumphed under the guise of special ethnic immunities, where manipulative dialectical ideology gives evildoing its justification and determination…?

I find you profound, falak. keep up the good work!

Thu, 02/16/2012 - 13:53 | 2166395 fonzannoon
fonzannoon's picture

They payment is due March 20th. They will wait until that morning, hand them the 16 billion or whatever it is, and Greece will hand it right back. Why would any other situation occur when they can do that?

Thu, 02/16/2012 - 13:57 | 2166409 falak pema
falak pema's picture

Do you remember the story of Aladin's lamp? Old lamp for new!

Draghi is Aladin. Nobody realises this incredible truth. He has a Genie he is looking for!

If he finds it, hey presto, Eurozone is safe!

Thu, 02/16/2012 - 14:26 | 2166546 JR
JR's picture

Could that genie of financial manipulation and advantage be named Goldman Sachs?  There’s proof already of a magic spirit in human form serving the elites of international finance. Look at the evidence:  

Draghi, who used to be Vice Chairman and Managing Director of Goldman Sachs International and a member of Goldman Sachs’ Management Committee, is now the new president of the European Central Bank; Mario Monti, who was a member of Goldman Sachs Board of International Advisers is Italy’s new prime minister, appointed not elected. And Lucas Papademos, Greece’s newly appointed prime minister, was involved in the Greek “cross currency swap” engineered by Goldman Sachs just after Greece was admitted to Europe’s monetary union.

Papademos is, in addition to being a former Governor of the Bank of Greece and from 2002-2010 Vice President of the European Central Bank and Greece’s rep on the IMF, a member of America’s Trilateral Commission.

Papademos was educated at MIT, had been at Columbia University and in 1980 was senior economist with the Federal Reserve Bank of Boston. He formed his Fed connections when he was a top research assistant to the late Nobel Prize-winning economist Franco Modigliani, who was born in Italy but left Rome in 1938 when Mussolini announced new laws against the Italian Jews. Modigliani had close contacts with the Federal Reserve and his students, along with Papademos, have included Charlie Bean, Deputy Governor of the Bank of England, and Stanley Fischer, Governor of the Bank of Israel.

Papademos served as European vp with its president, Jean-Claude Trichet, former alternate governor of IMF, governor of the World Bank and a member of the Washington-based financial Group of Thirty and also former chairman of the Paris Club, a financial group of officials of 19 countries that can provide debt cancellations for restructuring for indebted companies and creditors referred by the IMF.

Fischer, before becoming an Israeli citizen to head Israel’s central bank, had been vice president and chief economist at the World Bank, first deputy managing director of IMF, vice chairman of Citigroup, president of Citigroup International, head of the Public Sector Client Group, a member of the Washington-based financial Group of Thirty, and Fed Chairman Ben Bernanke’s Ph.D. thesis advisor at MIT.

At MIT, Modigliani worked closely with Nobel laureate Paul Samuelson, uncle of National Economic Council Director and Goldman-connected Lawrence Summers (family name earlier had been changed from Samuelson to Summers).

Thu, 02/16/2012 - 14:00 | 2166415 Yen Cross
Yen Cross's picture

So new covenants are deciding payouts on PSI? That means a discount/premium on the 66% or 75% / English law side of the PSI>

   HUSH MONEY? Greece is toast and we all know it.

Thu, 02/16/2012 - 14:03 | 2166430 youngman
youngman's picture

Greece will play the milisecond game..when the ECB turns their old bonds in and Greece has not yet issued the new bonds..it will look like they paid down their debt by 50 billion....at that point in time they will do a balance sheet..and it will show the Troica that all is OK....give me the money..give me the money

Thu, 02/16/2012 - 14:17 | 2166510 Atomizer
Thu, 02/16/2012 - 14:30 | 2166556 Piranha
Piranha's picture

Anyone, where do I buy a "I HATE MARIO DRAGHI" t-shirt?

Thu, 02/16/2012 - 14:35 | 2166575 JR
JR's picture

You'll have to go underground. It’s a hate crime to wear one.

Thu, 02/16/2012 - 14:47 | 2166618 AU5K
AU5K's picture

Put on your rally hats.

Thu, 02/16/2012 - 14:51 | 2166633 dead hobo
dead hobo's picture

In principle, the ECB bought $100 of bonds at a discount from a desperate Greece for $75 and booked a $75 asset in bond investments. Given current events, the bonds are probably worthless. To avoid having to report a $75 loss on the books when the bonds were declared worthless, the ECB will exchange the $100 face value bonds purchased for $75 and carried at $75 for new bonds from Greece, face value $100 but to be carried on the books at $100, thus declaring a profit of $25. The $25 profit will be distributed to EU members as newly printed money.

Only billions of euros are involved. Not $100.

It's possible that the 'profit' will be used to make the interest payments due 3/20, thus kicking the can down the road.

Since there will likely be a new Greek solvency crisis after this one settles down, this essentially makes the ECB both a hostage to Greek extortion and also makes the ECB a dead man walking with respect to its capital and its own solvency.  I can only wonder at the ramifications where other EU members face debt payment crises. On the other hand the ECB has a hobsen's choice here. Insolvency now if Greek debt is written off or insolvency later when the swapped Greek debt is officially declared worthless.

Yes, this is cooked books accounting and it will be great for the stock market, which expects central bank printing to support the goals of money center banks.

 

Thu, 02/16/2012 - 14:55 | 2166650 fonzannoon
fonzannoon's picture

I was starting to believe all the columns on here again. Thinking maybe the truth finally hits the market. What an idiot I am. This will go on and on and on. and on.

Thu, 02/16/2012 - 15:20 | 2166729 dead hobo
dead hobo's picture

On second thought, the nuclear option available to the ECB when Greek debt is eventually written off is NOT charge against the capital account, but a decrease in the liability associated with printed money.

Example:

At time of original money printing for Greek Debt

DR: Cash $75 CR: Monetary Liability $75

DR:Old Greek Debt $75 CR: Cash $75

 

Proposed Debt Swap

DR: New Greek Debt $100 CR: Old Greek Debt $75 CR: Gain on Swap $25

DR Cash $25 CR: Monetary Liability $25

DR Distributions To EU $25 CR: Cash $25

 

Correct Way To eventually write off Proposed debt Swap

DR: Capital $100 CR New Greek Debt $100

 

Likely Way To eventually write off Proposed Greek Debt

DR Monetary Liability $100 New Greek Debt $100

 

Conclusion: The ECB is a joke.

Thu, 02/16/2012 - 15:35 | 2166805 Graabein
Graabein's picture

Someone please help me! Now that the tune (again, for the umteenth time) is positive for a Greek resolution, I never found out if the last Greek party leader (who is thought to likely win April's election) signed the promisory note to stick to the plan after the election, or if he never signed. Have all leading Greek politicians signed? Or is the key guy still holding out??

Thanks!

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