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Some Simple Answers - As Requested
via Mark E. Grant, author of Out of the Box,
Rick Santelli at CNBC asked the question and he asked me for a simple answer so I gave it to him. Rick wanted to know how Greece had raised almost $5 billion in a Treasury Bill auction and I explained; simply. The debt was almost entirely bought by the Greek banks, who are bankrupt and funded by the government of Greece through the EU and the ECB in various ways, and they pledged the Bills right back to the ECB and they got their money back. It was a Ponzi scheme of sorts, which I stated, which allowed the ECB to lend money to Greece through the Greek banks. Greece is out of money and Germany is deciding what to do about Greece so in the meantime the ECB funded the country. Rick went on to state that “the game was rigged” and he is one thousand percent correct; the game was rigged.
At least we didn’t have to listen to the Greek Prime Minister calling it a great victory for Europe like we did with the Spanish one but that may be the best thing that can be said for the situation. The ECB violated their rules and strictures and did it at the behest of the European Union you may be sure which only proves, once again, that the ECB is about as independent as a three year old is of his mother. You can say the three year old is his own person but I assure you that each and every mother on the planet would roll her eyes at you. This then is one of the main problems with Europe these days; there are laws and regulations that are defined to be exactly what the EU wants them to mean at any point in time so that there are in effect no laws and no regulations and just political expediency.
Fraud
If IBM or GE or if Volkswagen or BMW did not include all of their liabilities on their balance sheet, did not include their promises to pay or their guarantees of other debt or their derivative contracts in their financial statements then they would be tried and found guilty of Fraud and the CEO and the CFO and the Board of Directors would all be in jail. These corporations live under the Law and the Law is that you have to disclose all of your liabilities and not just some of them. In Europe, for the governments of Europe when publishing their debt and their debt to GDP ratio’s this is not the case. They are not required and they do not include all of their liabilities when they give the public the data about their financial condition. This is why I keep stating that the European numbers are phony and I have tried to provide the real ones which is nothing more than counting what the Europeans do not wish to count. In each instance I included the regional debt that the government had guaranteed, the bank debt that the government had guaranteed, the corporate debt that the government had guaranteed and any derivative contracts that any government had taken on. I took all of the data from official sources such as Eurostat and the Bank for International Settlements. I then added up the numbers and divided that by the government’s official GDP and reached the result. There is no “Mark Grant’s opinion” in the numbers; I just counted what Europe does not wish to count or be held responsible for and that was it. Here is another case of “rigging the game” and it is accomplished by what would be termed Fraud for any corporation.
“The man who is admired for the ingenuity of his larceny is almost always rediscovering some earlier form of fraud. The basic forms are all known, have all been practiced. The manners of capitalism improve. The morals may not.”
-John Kenneth Galbraith
Apples to Apples
I am often asked about the United States and I am specifically asked about our future pension and Medicare payments. When I have calculated the real balance sheet of the European countries I have not included their corresponding pension guarantees or medical payments so I can honestly say that it has been an apples to apples comparison. The stated numbers for America are reasonably correct and our official debt to GDP ratio is reasonably correct and while you could make the argument perhaps about the debts of FNMA or Freddie Mac and some other quasi-government bodies the data would not change much because of the off-set of assets. Therefore, in my opinion, the official numbers for America are basically honest while the official numbers for Europe are not.
In assessing the official European numbers you are likely to reach the conclusion that the European Union is in trouble. When assessing the real numbers it becomes obvious not just that they are in trouble but just how serious the trouble is now. Old debt is being replaced by new debt and the new debts are far larger than the old ones as exemplified by the calculations that I performed yesterday on Italy which will add $141 billion to the sovereign debt this year. The Spanish banks are into the ECB for record amounts while Greece with its massive borrowings at the ECB, the IMF, their Target2 participation and their direct loans from the Stabilization Funds is so far underwater that financially Athens is now buried ten meters under the Mediterranean Sea. Whether Greece is going to be handed another $50 billion in the next few months or whether Germany is finally going to cut the cord is a political question that is highly dependent upon the perceived reaction of the German voters but one way or another, now or later, Greece will eventually default because there is no other way out except debt forgiveness and I see that as a political impossibility in many countries.
Be Careful What You Wish For
Europe hates the ratings agencies. These companies have two distinct set of Masters which are the debtors and the lenders or investors. The ratings agencies have been cajoled, threatened and debased but, in the end, they will arrive at ratings which will be disastrous for Europe. This will happen because the economic data will force it to happen and while it may be eventual; it will happen.
Any scheme such as Eurobonds or any other artifice that produces a unified Europe where national boundaries fade away will result in an average rating for all of Europe at “A” or maybe “BBB+” and the cost of funding and standards of living will also revert to a mean for all of Europe. This is why Germany is in such a perilous state because they know this. You may disregard all of the rhetoric and the jargon; the people in Berlin do not wish to live like the people in Athens and that would be the certain outcome, over time, of blending the national debts. The nations with the money would be forced to disgorge and the nations without money would be the recipients and you would get a harmonized Europe but at a huge price to the wealthier nations who would no longer be wealthy. In the first instance money has rushed to Germany and a few other countries as the safest of the European places to stash cash but in the second instance money will leave all of Europe as influenced by rising debt levels and uncounted liabilities that will become due and severely weaken the national balance sheets and the balance sheets of the European institutions such as the ECB. The ECB may well be forced to print money or a number of other schemes could be employed but the cost to Germany, for any of them, will throw that nation into peril as they just do not have an economy that is large enough to support all of the troubled nations in Europe which is a growing list with each passing day.
This is why I stated yesterday on CNBC that Europe will have a “Lehman Moment” and likely a number of them. The construct is a failing enterprise as the available European capital cannot support the combined debts and as real money investors pull their capital and stop lending because of the continuing deceit. You may be able to “fool some of the people some of the time” as Abraham Lincoln so succinctly put it but you cannot fool all of the people all of the time as I humbly nod to his sage wisdom.
Wise men are instructed in reason;
Men of less understanding by experience;
The most unknowing learn by necessity.
Wise men do in the beginning what fools do in the end.
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So this says the U.S. numbers are good and not lies?
the spiders web and the one eyed soothsayer...Grant of US delusion.
Its the financial Titanic stupid and were all on it!
...fixed!
If IBM or GE or if Volkswagen or BMW did not include all of their liabilities on their balance sheet, did not include their promises to pay or their guarantees of other debt or their derivative contracts in their financial statements then they would be tried and found guilty of Fraud and the CEO and the CFO and the Board of Directors would all be in jail...
Stop, you're killing me
That was good for a giggle, wasn't it?
The only credit I give him for that statement is that he didn't say banks....oh wait GE....ooops.
And aren't we the country that gives IOU's to social security so we don't hit the debt ceiling?
Actually, the Social Security program here in the US has so many IOUs given to it from the previous decades that Congress 'borrowed' from the SS program that it can survive to about 2035 without any need of increased withholding or raised taxes or anything else.
i think he had his fingers crossed behind his back when he said that....or he is aware of how obomber may ndaa his ass if he gets out of line....
EU = Engineered to Fail
Waterloo 2.0
or is it Waterloo 17.20102 i ve lost track really
Waterloo worked out great for Nathan Mayer Rothschild...
That we have accounted for benefits the "same" as Europe? That FNMA and Freddie Shouldn't count? WOW! Is ABC Media, LTD, THE ABC?
It's some obscure company based out of Sofia, Sofia in Bulgaria.
TrimTabs is part owned by Goldman Sachs fyi.
There's rumors going around already that ZH could have some Wall Street backing itself.
Hey ZH is a great news source and I read it atleast a couple hrs/day, I just wish they would be more open on why any search for answers leads to dead ends in Switzerland and dummy corporations in Bulgaria.
You're right. They should tell you everything to include their real names and home addresses. There's nothing dangerous about sharing what they share on here after all. What the hell is their problem anyway?
LOL ... Hell, why not publish the full names and home addresses of all contributors and commenters, as well. Maybe also include what schools the kids go to....
"If you've nothing to hide, then you've nothing to worry about" --- Big Sis
"If you see something, say something"
I always thought that was a very creepy line...
Comment like yours got Veyron banned for a while past weekend. He posted some dropped lawsuit against dalrymple which alleges that Tyler is a former trader named Daniel Ivandjiiski -a Bulgarian national- who was banned for life by FINRA because of insider trading. See http://www.zerohedge.com/news/former-defense-secretary-says-us-will-prob... first comment.
I don't know the details about it. But Tyler could be anyone. They say there are many Tyler Durdens contributing to ZH. I like ZH. But they bash Europe a lot. Mind you, plenty to bash about. But so is there in the US.
They bash the US plenty . . . and it is appropriate, just as the European bashing is. The global financial, investment, and economic systems are all "f"ed up.
Switzerland's "neutrality" =
"The Bank for International Settlements (BIS), the "first beast", was founded in 1930 and was the first entity to be called a "World Bank." Monetarist and gold-based, it functions as a clearing house for the balance of payments between nations. It operated throughout WWII as an interlocking directorate and a clearinghouse for joint Allied and Axis high finance.
The World Bank/International Monetary Fund (IMF), the "Second Beast," was founded in 1946, after being drafted at Bretton Woods, New Hampshire, during the war in 1944. The IMF functions as the collection agency for the World Bank, much as the IRS functions as the collection agency for the Federal Reserve Bank. The Wall Street branch of the Federal Reserve is the "fiscal agent" for the IMF in the USA. The capital pool of the IMF consists of the Prime Banks of the First World, which interlock with the First World (G-7) military-industrial complexes and the oil conglomerates.
The IMF functions under the aegis of the United Nations, as a Keynesian paper credit-mill, extending credit in the form of Special Drawing Rights (SDRs) to the Second and Third World debtor nations, requiring that they purchase specified amounts of the currency of the G-7 nations, imposing "austerity terms" upon their internal economies, and looting them by means of "repayment schedules" of their natural resources and minerals. These are channeled through the General Agreement on Tariffs and Trade (GATT) to the multinational cartels, also headquartered in Geneva, Switzerland."
Your post is so good that I copy pasted it to store it on my hard drive.
If you want to see, in depth, how the banksters in the BIS played both sides of the coin in WWII I recommend Charles Higham's "Trading with the Enemy".
BIS was set up to collect German Reparations under The Young Plan and is in Basel because the railway lines meet there
most of us are aware about the recent news of trm tbs/gs info...which is why " the biderman" has lost any credibility i had for him, ...lloyd: alright biderman your first mission is to convince those zero hedge assholes to buy facefuck.
and maybe that is why he isnt on zero hedge that often anymore.
and i think the fight club members would sniff out instantly if the tylers were replaced by tylers with a different agenda...and how fucking awful would it be if the hedge got trimmed...i can only speak for myself but zero hedge ranks in my life in this order...my wife, my dog, zero hedge, and my kid....
creating debt machines, a central bankers guide to rape
dont have a central bank?
YOU ARE WITH AL-QAEDA
Or possibly with Standard Chartered.
Hey, leave Standard Chartered alone.
They paid.
Not like some of its competitors.
Credit Agricole = default = Lehman (European Case)
Peugeot = default = General Motors (european Case)
Spanish Debt Haircuts in Sovereign and Hybrid bonds= Dilutive
SELL
Short French Equities, Sell French Bonds all across the curve from 1yrs to 10 yrs tranches.
We (USA)simply are not first in line at the gates of financial hell....but we are in line...all qued up and ready to go.
It's not really a line, more like the edge of a cliff and the ground behind us continues to disappear and we are all bound together. At this point, it doesn't really matter who's first. I guess, if I wanted to take the analogy a little bit further, some have already gone over the cliff, but the weight of those up top is sufficient, for now. At some point, the weight of those over the edge will take it all down. The EU would do, the US would do, so would a modern day Credit-Antalt, and there are plenty of those ready to take the plunge.
it would be amazing if the spx could drop 1% today..
The debt was almost entirely bought by the Greek banks, who are bankrupt and funded by the government of Greece through the EU and the ECB in various ways, and they pledged the Bills right back to the ECB and they got their money back...
I have been wondering why nobody thought of this. I guess they did. Good on them. The pikers should have gone for a whole lot more than 4B though. They don't even need the ecb, just conjure up 500B and hide it on the books the way usa banks do.
yes. this.
1) greek banks lend greece one treelion euro at 0% for one hundred years.
2) Banks hide notes on books eventually going bankrupt.
3) Greece capitalizes new banks with the ill-gotten funds
4) Everyone is happy.
Except the muppets.
And then they are not intended to make the muppets happy about paying through their noses.
well, not everyone... ;)
Next weeks lesson:
Folding a Euro in half to make 2 euros and the Chicago Bankroll.
JUST IN: Hearing rumours that the Swiss National Bank has been selling euro
Correct and the euros are Germans but keep it to yourself
The 'tripwire' in the above [which is maturely-written... a real oddity on this particular subject] is the term "available capital".
Based on what is known thus far, "available capital" is a fluid number that in the end will be what it has to be to successively bail the PIIGS plus France and probably the UK, no?
Surely you don't mean "available capital" in the old sense... that is a medium of exchange pool that is based upon real assets. Few now living can relate to such an archaic form of "money"
I thought Greece was printing money with the blessing of the ECB and the bundesbank.
Wouldn't surprise me that ZH has some WS backing because at the end of the day whoever Tyler is KNOWS the business. That is what WS used to be all about, true capitalists. Still a few people like this but most are so disgusted that they will not come close to the big banks now, these pathetic shades of communists and cronies that now inhabit the place. Maybe Weil had an epiphany and realized that the culture of WS from his youth has been utterly trashed by his self serving actions.
Part of the eurozone coverup is the insolvency of Greece and its request for a 3rd Bailout:
http://dareconomics.wordpress.com/2012/08/15/greece-is-insolvent-iii-see...
Where is this analysis that he mentions, which compares the real EU member country numbers?
Always lovely to hear about Corporates like GE and VW but I think of Enron and Parmalat when I think of non-consolidated liabilities and I think of Lehman and JP Morgan and probably Bank of America but then again I am a bit cynical.
The whole financial system is a fraud and has been for decades. The treatment of Goodwill on Balance Sheets, Brand Valuation, Revenue Recognition and of course the Wonderful World of Private Equity with the Amazing Secondaries Transactions Scam......the whole system is a giant fantasy. The fact that Government is now copying the Financial Fraudsters as it merges with Wall Street should be no surprise. It is all about POWER and they will burn anything to keep warm
Mark,
If you want to compare apples with apples rather than oranges, why this:
"If IBM or GE or if Volkswagen or BMW did not include all of their liabilities on their balance sheet, did not include their promises to pay or their guarantees of other debt or their derivative contracts in their financial statements then they would be tried and found guilty of Fraud and the CEO and the CFO and the Board of Directors would all be in jail."?
How about comparing banks with banks if you want to validate your point? I like your writing, but I am sick of seeing even the best commentators such as yourself, denying reality. What about MFG, JPM, BAC, etc.,etc. as comparative entities as long as you are speaking of banks---or the fed, boe-------------------?
I hate reading thse comments because of the illiteracy on this site, so I have not had much to say, but this is directed to Mark Grant and maybe the pi-rat or cog or y/c or lop----I don't care about other ignorant opinions such as my own om