Revised Troika Forecast Sees Total Greek Debt-To-GDP Peaking At 186%: Here Is What Happens Next
Back in May 2, 2010, when discussing the first failed Greek bailout (still to be implemented) we made the following observation: "Ignore for a second the sheer lunacy of anyone who thinks that the Greek government can grow GDP and decline the budget deficit in a straight line now that the country will see crippling strikes and rolling riots (not to mention blackouts) on a daily basis. But do note the black line, which shows the projected Debt/GDP ratio for the country as part of the bailout package. In essence Greece will go from having "only" a 133% Debt/GDP ratio to an insane 149% in 2013 before presumably dropping to 144% lower in 2014, still a good 11% higher than currently. Greece just got bailed out so it can get into even more debt! What psychopath of the Keynesian school thinks that this unbelievable trajectory is anything but a complete and utter waste of money? German, and US taxpayers, are merely giving Greece money so it can increase it debtor status with French and a few other European banks. To say that this is a viable solution is something that only those who bow at the altar of Alan Greenspan can do." And so once again, in the endless battle between common sense and Keynesianism, it is former 1 - latter 0, after the Troika yesterday released its revised projections for total Greek debt/GDP, which has just been hiked from 149% to 186% by 2013! Said otherwise, Econ 101 textbook insanity just cost the Greek people roughly half their entire GDP in incremental debt (which they will never be able to repay anyway), however in the process they kept French banks alive and well as a Greek default in May 2010 (the only real option) would have not only destroyed a failed economic monetary union, but blown up the entire French bank system. Fair trade off in that other endless battle, between the 99% and the 1%.
The chart below shows the relentless negative revisions in the Greek catastrophe. The longer a default is delayed, the worse the total debt-to-GDP will be:
And as for reality which is slowly returning, perhaps if Greece and Troika had read the following Citibank report, instead of threatening to sue as we reported, it would have realized that sometimes a calculator is your better friend than lawsuit threats. Recall this piece: "Citi Expects A 76% Haircut On Greek Debt (And 95% If Country Waits 4 Years) For Debt/GDP Ratio Back Down To 60%" which came out months before the July 21 proposal came out with a 21% haircut idea. Obviously the reason why nobody took the 21% haircut seriously at the time, or ever, is that it was a total mockery. Sure enough, it only took the Troika half a year to understand simple math, and even so it still has a way to go. From the just released report: "The results show that debt can be brought to just above120 percent of GDP by end-2020 if 50 percent discounts are applied. Given still-delayed market access, large scale additional official financing requirements would remain, estimated at some €114 billion (under the market access assumptions used). To get the debt down further would require a larger private sector contribution (for instance, to reduce debt below 110 percent of GDP by 2020 would require a face value reduction of at least 60 percent and/or more concessional official sector financing terms). Additional official financing requirements could be reduced to an estimated €109 billion in this instance. Of course, it must be noted that the estimated costs to the official sector exclude any contagion-related costs."
In other words, even the "Ostrich with its head stuck in the sand" known as Europe, finally did the math on both Bailout 1 and Bailout 2 and realized they don't work. But at least it is a start. Of course, between May 2010 and October 2011 the market had countless ramps on expectations that the "Bailout would work", confirming yet again that the market is now completely irrational, inefficient and broken. But we all knew that...
Alas, as we have reported, having actually done the math, the EFSF plan will also fail. But it will take Europe, the Troika and the market about 16 months to fully comprehend that. In the meantime we will see ever more violent rallies and plunges as the market's optimistic cognitive bias, and its recurring clashes with mathematics, come into full view, over and over.
Next Steps
And now that even France appears ready to admit defeat and accept a 50% haircut on Greek debt, here is what happens next. Every PIIGS country in Europe will demand the same treatment: in fact we expect Ireland and Portugal, followed shortly by Italy and Spain, to pull a Greece and report worse economic data than actual, just to attract the bond vigilantes attention, have their spreads blow out, becoming the next Greece in the process and getting a "half off debt" blue light special. In fact, the faster the better, as there will likely not be enough firepower for the last of the 5 PIIGS. Of course, by then French banks will be thoroughly undercapitalized, needing well more than E100 billion of the allotted capital, and France will long have been downgraded from AAA, forcing the EFSF to be the sole burden of Germany, which will have to pledge anywhere between half and 133% of its GDP, to keep the EUR and Europe solvent. Good luck with that.
But yes, there will be a short and sweet rally in the EURUSD... Until the reality predicted above once again defeats all the temporary insanity that is now the only upside catalyst of modern 'capital markets'.
Full Troika revised admission of failure below:
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"Strictly confidential"... BITCHEZ!
"The results show that debt can be brought to just above 120 percent of GDP by end-2020 if 50 percent discounts are applied. Given still-delayed market access, large scale additional official financing requirements would remain, estimated at some 114 billion (under the market access assumptions used). To get the debt down further would require a larger private sector contribution(for instance, to reduce debt below 110 percent of GDP by 2020 would require a facevalue reduction of at least 60 percent and/or more concessional official sectorfinancing terms). Additional official financing requirements could be reduced to an estimated 109 billion in this instance. Of course, it must be noted that the estimatedcosts to the official sector exclude any contagion-related costs.
"(1) The ECB does not agree with the inclusion of these illustrative scenarios concerning a deeper PSI in this report."
Pricesless!
Prepare for the -50% PSI scenario to be announced and the Greece Bailout II total to be EUR 114 billion (What will be Eurozone vs. IMF share?)
I am personally rooting the oh-so-tough -60% PSI discount and EUR 109 billion, as that would maintain the illusion that this was all pre-planned already in July 2011 when the EUR 109 billion was announced and now cleverly maintained.
I believe it’s time to get this economy sorted out once and for all. It’s time we called a G8 meeting, so that world leaders can devise a plan for coordinated and aggressive fiscal policy. And it’s not just up to politicians - central bankers across the world also need to get serious with regards to monetary policy. This crisis is too big for countries to act alone. This economic crisis is not going to be solved without groundbreaking advancements in global economic governance. Together we are stronger, so let’s get together and TAKE ACTION.
All of your posts read like nonsense. It is like you have no idea what math is.
The arithmetic is irrelevant to anything other than helping to create the illusion that someone actually put some numbers together and wrote a report. The only thing that is important is this:
If/when the "markets calm down" and return to "normal" it will be a lot easier for GS and company to off-load the toxic shit onto the sheeple/clients and then the real bailout of the elites will have happened. Just the fees for pulling this off will be serious gas money for the mega yacht crowd.
There is a theory which states that if ever anyone discovers exactly what the Universe is for and why it is here, it will instantly disappear and be replaced by something even more bizarre and inexplicable.There is another theory which states that this has already happened.
Douglas Adams
What you are describing has a name. It is called TARP.
It results in high unemployment and stagnation because markets can not clear. But it also results in political fortunes, high lawyer and consulting fees, significantly expanded government power, bank rewards and other rent seeking beyond all knowing.
So we have that going for us. Which is nice.
We must join hands between the conservatives and liberals of the nations of the world under the flag of Soros to bring this crisis to solution. I am with you, brother.
How about a different idea. How about we give up central planning. How about we quit indenting the citizenry against their will to fund these grand Keynesian schemes? I know, snowball's chance in hell. So how about a halfway solution? Every central planner who votes for this stupidity has to put up a proportional amount of their own money? If Greek bonds take a 50% haircut, then the planners do too. If the Greeks default, then the genius planners get to rejoin the middle class and poor, too. It would stop this stupidity in a heartbeat.
I am a libertarian but this is true class warfare. It is not the rich vs the poor like the moronic leftists portray. It is the political class versus citizens everywhere. This is exactly how we all become debt serfs to governments and businesses connected to government.
The reason the EU fails is because:
http://www.youtube.com/watch?v=F-QA2rkpBSY
agree 100%; it's a silent coup.
Minister Maxime Verhagen here (Netherlands) transferring souverignity without admittance he's doing this. These politicians honestly think that this is going to work in the long run (doing away with political structures and checks and balances for some vague unchecked invisible powerbase in some other part of the continent (Brussels)).
Honestly; if they (EU Commission) have messed up so far, what's the prognosis for them, mending their ways, and dealing with the corruption?
How about this powerbase not having ANY control over the citizenry in the decades following the (inevitable) financial collapse? How about the whole thing turning into chaos at some point? That's what these politicians are aiminig for. They're aiming for 17 Papandreou type failures. Because that is the world they live in themselves.
The european union can ONLY work when there's an equality between commercial and non-commercial (humanitarian) interests. Otherwise it's just figments of megalomaniac imagination and doomed. NO empire ever survived or thrived when it's powerbase became too centralised. Therefore I see a bleak future for europe if the democratic checks and balances are done away with. Just like the USA a federal government with too much power has no feedback from citizens and local business, and will be a terrible incompetent but threatening structure. It will inmediately spawn local (provincial) governement to grow stronger, as every action has a reaction (enlargement of scale, evoces a vacuum in local powerbases). The problem is then, this will lead to a fractured rivalling continent (and economy) and a breakdown in international business after a decade or so.
Fools!
I think you are on the right track. The problem is always centralization of power. It gives the power of gods to a small handful of men who fancy themselves gods. Power corrupts. Let me leverage your idea and consider this: Central planning itself is a form of conceit. Conceit begets arrogance. The arrogant ignore all those feedback mechanisms you mention.
I have a new theory I am exploring. The idea is this: You cannot have a democracy and a powerful central government. It is not just the simple equation that powerful governments by nature usurp freedom. It is more subtle than that. The genius of a weak central government is that it takes away the power of each of us to fiddle with the other. Regulations are written by people who absolutely nothing about what they are regulating...but suppose they do. The other part of the problem is Greece. Politicians lied and said you can retire at 50, have two months of vacation per year and get all sorts of free stuff in perpetuity. Politicians lied, the bankers financed it and the people said "Sign me up for that!" and kept them in power. It could never have happened if the government did not have the fundamental power to redistribute wealth and indebt people without their express permission. The electorate was bribed with their own money! The debt was the difference between what cowardly politicians extracted in taxes and the true cost of all the freebies.
The socialist-redistributionist-collectivist-statist keynsian endgame is here. It will not be pretty. We have all jumped off a 100 story building and Greece is just the first to hit the ground as we congratulate ourselves on being so much smarter. America is just 40 stories behind.
Cue "LetThemEatRand" to chime in and accuse you of being "unfair" and "heartless" for speaking the Truth!
May be I am not bright but, Greece lied, cheat, and didn't work hard and their bankers knew about it and still loaned them money, why somebody else should pay for their bailouts?
I see no reason for to pay so somebody else stupidity, incompetence, theft, and uncontrolled gread!
I agree with you but I think it is more than simple greed. See my post above yours. We all are suffering the same problem and will meet the same fate...without some sort of correction, at least.
They had that. It's called Bilderberg.
The groundbreaking advance in global economic governance is happening now.
All world citizens will receive a digital stipend much like crew members on the USS Enterprise.
Materializers shall provide food and drink.
Unless we have a war in which case you may have to report to a Liquidation Station.
I got it figured that MDB is Obama's speechwriter. MDB generates lots of words but almost no real meaning. Perfect for a demagogic politician skilled at creating illusions.
So you're saying the wordcloud for all his posts would be dominated by "WE" and "YES" and "CAN" and "CENTRALLY," among other buzzwords?
there will be no concerted plan as long as there are US oligarchs who are in total denial...they want to kick the can for here to eternity...i hope you saw the film...it was another age...when the USA had right and might on their side...
AMEN brother!
God bless the G-8 ministers, and the countries for which they stand.
I KNOW you all will join me in praying that the Lord just gets out of the way so our wise, and forthright leaders can get on with correcting our mistakes.
Thats right mdb, the elite will save us, they love us really
ROFL!!!!! I'm busting a gut laughing MillionDollar!
What Greece and the rest of the insolvent PIIGS countries need to do is follow Iceland's example; vote out the existing criminally degenerate government IMMEDIATELY, select new leaders from within the population IMMEDIATELY, declare a default IMMEDIATELY, and give the banks, and the IMF the middle finger thereby preventing any further defaulted private banking risk to be transfered unto the backs of taxpayers. That is the example to follow. It is the only way to make the bankers pay for their reckless behavior and to inject some needed discipline into the banking system.
"The results show that debt can be brought to just above 120 percent of GDP by end-2020 if 50 percent discounts are applied...."
And what currency will this debt down to 120% of GDP be in? Euro2s, Euro3s, Worldos, Universos, olives, figs, basebal cards...
'Going Greek' used to mean taking it up the poop shoot..... I guess it still does.
On it! Thankx from China!
To me that is Greek in plain English. Thanks.
In plain engwish... EVERYBODY WANTS TO BE GREEK so ZE GERMAINS CAN BAIL ZEM OUT
but isn't obvious yet that the goal is to do the same thing to Germans and Americans that has been done to greeks? we all will owe our first born children to the satanic cabal before too long...
I think of us as more paganical than satanical. Call it "theater" if that makes you feel better. I have noted only dogs come and lie down next to our fires.
a swift's euphenism =`s "a modest proposal", how delicious,... but has the cabal lost its appetite for a pound of flesh?
In plainer English: Everybody is about to get Greeked with a broomstick. The fundamentals never work until they work, and then it is owch my aching arse.
This has gotten utterly ridiculous
Just how deep are they willing to let this rabbit hole go.
There is a bottom
for as long as they want I guess, shorting and now selling or closing your accounts are strictly verboten!
They've Just discovered a whole new layer of lunacy:
Eurozone leaders seek foreign money to boost bail-out fund
Discussions have turned to using the €440bn (£383bn) European Financial Stability Facility (EFSF) as bulk insurance for another fund backed by private investors.
This second "special purpose vehicle" (SPV) would be used to buy new and existing eurozone sovereign debt, with a particular focus on Spain and Italy. The EFSF would provide blanket first-loss protection to the second fund, which the authorities hope could top €2 trillion.
http://www.telegraph.co.uk/finance/financialcrisis/8843333/Eurozone-leaders-seek-foreign-money-to-boost-bail-out-fund.html
The plan is to so saturate the media with this constant blabber that no-one gives a fuck what happens, just as long as we don't have to hear about it.
"expect Ireland and Portugal, followed shortly by Italy and Spain, to pull a Greece and report worse economic data"
The way this whole CF is playing out, I expect to wake up spooning with Taylor Swift before THAT would ever happen.
http://www.google.com/imgres?q=taylor+swift&hl=en&sa=X&rlz=1T4GGHP_enUS4...
"There is a bottom."
Yes they will dig till they reach China.
Nuh-uh. It's a wormhole....
And not the kind dug by fish-bait.
How bad do things have to be to allow this to happen? People aren't retards. There must be something cataclysmic around the corner. It must be just insurmountably bad.... Maybe there will be a new Dark Age, or worse yet, cats sleeping with dogs.
If cats are laying with dogs, then surely, pigs can fly! I'm looking forward to that for some time now.
[There must be something cataclysmic around the corner. It must be just insurmountably bad.... Maybe there will be a new Dark Age, or worse yet, cats sleeping with dogs.]
What's coming is a 10 to 20 year rolling global civil war as the sheep slowly learn they are being buggered. The collosal debt means indentured servitude for your children and younger generations, there is no way that can be left standing. That which cannot be, cannot be. Here is a whole book on what this civil war will look like. http://www.futurnamics.com/civilwar.php Occupy Wall Street and the Tea Party are just the canaries in the gold mine. (pun intended)
The Germans have been revising down their economic future at a rate of knots this week (one already suggesting they were already in recession)
Perhaps they will beat the rest to it and be the first in with the begging cup
Germany will return to the Mark shortly... Problem solved for Germany, but the rest of the EU is screwed... This is the only way out for Germany and the longer they wait the worse the train wreck.
Its insanity of an "exponential" dimension as only the Troika could dream up, and foolishly convince others the mirage is indeed reality. I dont believe the market will play along much beyond the "sucker's" rally.
Rocky & Bullwinkle - Election Parody - YouTube
well, well, well,
here it comes....
collaspse....hope you guys are ready....from what im hearing, it should start this week...
we shall see...
Jenga!
Again!
Maybe!
GDP = C + I + G + NX
Decrease G => decrease GDP => debt/GDP increases.
The real ridiculousness is that in addition to demands that G be cut, they also demand debt be increased. How anyone who comes out publicly and states that such a plan will suceed in preventing default/bondholders from suffering massive losses and is not laughed at is beyond me. Nevermind that there are zero examples in history where such a plan has succeeded.
You still don't understand swaps.
thats the price for marrying a beautiful wife...you don't want to swap! You never learn swaps until she waps you with a divorce for cheating, ie : selling her short without a derivative play to insure her future or her immediate satisfaction.
Classic!
There is one easy and very ovious solution:
Give the EFSF a banking license and allow them to sell CDS on EURO-Bonds as well as the Bonds themselves!
See? Fixed!
Not to worry... :o)
Eurozone leaders seek foreign money to boost bail-out fund4:37PM BST 22 Oct 2011
Telegraph
Aldrick and Waterfield in Brussels
http://www.telegraph.co.uk/finance/financialcrisis/8843333/Eurozone-leaders-seek-foreign-money-to-boost-bail-out-fund.html
Eurozone leaders are hoping to tap the world's largest sovereign wealth funds for hundreds of billions of pounds under revised plans to boost the single currency area's bail-out scheme. Discussions have turned to using the €440bn (£383bn) European Financial Stability Facility (EFSF) as bulk insurance for another fund backed by private investors.This second "special purpose vehicle" (SPV) would be used to buy new and existing eurozone sovereign debt, with a particular focus on Spain and Italy.
= = = = =
Which "sovereign wealth fund" anywhere on earth would even lend a dime to euroland??
Ha! A new meaning to Enron shell games.
Some Arabs might, if the Europeans sell them parking meters. We did it in Chicago with tremendous success. Just think of all the things that can be sold off to secure those loans. I'm sure it will all work out swimingly.
I am sure Saudi Arabia will be willing to take the Eiffel Tower and the Louvre as collateral on a nice investment in the ESFS SPV. Why didn't Sarkozy think of this first?
I'm hoping to buy German roads. I've got some great plans for a few houses and hotels. I can't wait for this sale. I just landed on Greek oil terminals and bought one. Does anyone want to trade or buy?
We can fix this with my 999 plan
To make an apples to oranges comparison, we will print our way out of this and apples and oranges will be 999 cents each.
Then we can use my ring fence approach and isolate the PIIGS with not only an electrified ring fence but we will also build a moat with alligators to make sure no debt can escape to our borders.
Debt to what GDP ... Current or projected. they are asking 700,000 (35 million pro rata if in America ) people to take a 40% pay cut and be put on stand by to be sacked within the next 12 months there will be very little ecconomic activity going throught the books.
The end is "riots in Paris." nothing less...nothing more either.
France had a lot of revolutions in the XVIIIth and XIXth century.
I think they have a lot to catch up!
Weekend Current Events Quiz:
In International Finance, the term Merkosy often refers to:
A - A chimpanzee act
B - Two of the dumbest white critters in Christendom
C - Failed leaders of fucked up welfare states
D - All of the above
As usual, extra credit for sarcasm and/or biting irony.
Thank you for the summary. I went to public schools an dneed very simple explanations.
off topic again..
Watch: The Great Silver Debate
The dwarf has worn his black tie. He must be pounding his child size fist into pig face Merkel right now.
"dwarfs have rights..including the right to be tossed. I will defend your right Mr Dwarf! I will defend you!"
Its not the tossing that matters its the where and the how.
Or who:
www.youtube.com/watch?v=DxWTwB0NdNo
Thanks, Keiser!
Thank goodness Naked Shorts have been banned in Europe.
I have a question. Ive had it for a long time and can't seem to solve it.
So i pose it to those brighter then i.
Why (not how ) does the the world work as well as it does today?. Yes just today as the world works; for today.
I've been asking myself this question for years.
All the accounting, logic, reason, law and humanity says the world should not work. But so far so good says the man as he passes each window after he stepped off the ledge of the 89th floor.
"The world will work untill it stops cold. Like the heart in the man who walks off the leadge of the 98th floor window."
Is that it. The answer. Finish the game.
There must be a first to call the bluff, or cash'n the chips at the table.
Something or someone must give, call it a night.
Who, what, and where will this moment be?
I dont know; but this day the world works, so; so far so good as we pass this window i will wave to those working inside.
PS: If you could make the coment font the same size as the origanal text that would be nice. The smaller font of the comment window increase the typos.
"it's not the fall but the landing" I'm told. Well...looks like an overloaded A380 with three engines out and you're the "man in the control tower." Go easy on 'em.
LOL. If it was as clean a landing as a rock from space i wouldn't be half as worried as i am. An, a380 is a good aircraft even with two elephents as pilots. Its the landing without fuel in the ocean. "as the man in the control tower." You know they are out of fuel and are not going to make the run way, the pilots have hope that they can cost on in.
Its your call.
Is the A380 really Pan Am flight 103, or Iran Air flight 655? The navy can take care of it.
A stealth fog bank is heading west at approximately 8.7 knots. As needy financial institutes seek new revenue streams to offset present EU liabilities, OWS (Obama's Welfare State) commotion will ripen new wealth transfer opportunities.
The Whinety Whine Poorcent
Must watch and ask yourself, is this not all planned? Turn up the volume!
Ministry - The Land Of Rape And Honey
I don't get how their projections skyrocket until 2013 and just goes down afterwards, shouldn't it keep going up?
Same logic as that used by our USA govt in their plan to "tackle the deficit"....i.e. total hogwash.
European governments will be dragged kicking and screaming to the solution - default by all the pigs and bankruptcy for their banking system.
The PTB hope to kick the can until a miracle happens and everything is ok. That's the whole plan.
INFINITE QE AND OTHER ASSET BUOYING ACRONYMS = DOW 30,000
Y U NO WANT DOW 30,000?
YOU MUST HATE AMERICA.
Akashic,
Your posts on FDIC receivership came up under Reggie's latest article.
Question for you on FDIC receivership. If BofA declares bankruptcy prior to FDIC implementing receivership then don't bankruptcy laws supercede FDIC regs?
Thus dervivative counterparties would go to the front ofthe line.
Thus, if BOA declares Bankruptcy we know what game has been played.
If they go into FDIC receivership without declaring bankruptcy, we'll
have to suspect they made the FDIC an offer they couldn't refuse.
Me no understand, didn't Soros say that Europe has to have a common treasury and a fiscal union in order for the Euro to survive and isn't Soros always right?
Maybe if they started with a Supreme Court and good old "up yours phucker" from The Nine and they'd get their mojo back.
this is enough to drive someone to drink ... dont worry the can will be kicked ..
Right now they're playing hacky sack.
The goal isn't to solve the problem---which at this point is a mathematical impossibility----it's to postpone as long as possible the implosion of the system that has made a few people very powerful.
You forgot to add "for now."
Countries around the world are taking on more debt without any fruitful attempts to curb their expenditures. This has resulted in a much more fragile and artificially held up financial system which is on a much shaky ground than it was in 2008. In 2008 companies failed due to excessive leverage and debt and now countries are likely to default because they took on the same bad debt on themselves. The borrowing costs or bond yields for these countries are again at record highs for the year due to their deteriorating financial condition.
A single currency for an economy as strong as Germany on one hand and relatively weaker economies like Greece or Ireland on the other is not sustainable in the long run. The idea of the stronger countries in the Euro zone to keep on bailing out the weaker ones repeatedly will be a difficult one to sell to the citizens of the economically stronger countries. Their is no practical way to save the Euro, the only thing that the politicians can do is to lavishly spend tax payers money towards bailouts which creates a much bigger crises a few months down the line but does not solve anything.
http://www.marketoracle.co.uk/Article24581.html
Does it matter really? What's the difference for the average guy when your country is 150% in debt and 200% in debt? None.
Well, it does matter when the 'average guy' is rapidly becoming someone who's on food stamps.
100% of all countries who have surpassed 90% debt/GDP have collapsed.
Fact.