Greece to Collapse Monday Afternoon

[saxitoxin]

Look at how popular my thread has become! I remember when it was just still an embryo in a test tube in my lab and now look how big and strong it's become!

Please don't respond to this message here. I want to keep this thread growing to be big, strong and healthy. I'll start a separate thread we can use to discuss this thread.

[2dimes]

Yeah for sure. Do you have any idea what monday it's going to be yet?

[saxitoxin]

Yeah for sure. Do you have any idea what monday it's going to be yet?

This was addressed in message number 2, page 1.

Thanks, 2dimes!
- Uncle S.

[Phatscotty]

See, now Greece is in the exact same position it was in before, on the verge of a default. What did the emergency trillion do? It bought a few months.....but WHY? Was it worth it?

Why didnt Greece just make the cuts 2 months ago, rather than go further into debt?

WHY DOESNT AMERICA JUST MAKES THE CUTS NOW? RATHER THAN GO FURTHER INTO DEBT!?

[Pedronicus]

Why didnt Greece just make the cuts 2 months ago, rather than go further into debt?

WHY DOESNT AMERICA JUST MAKES THE CUTS NOW? RATHER THAN GO FURTHER INTO DEBT!?

Two reasons.

1. The Banks and the Politicians are one in the same.

2. The cuts required to make a real dent in the debt would need to be so massive, that they will kill a country (Even US of America). If they default on their debts, the are no worse off than if they tried to do something about it.

[Fruitcake]

ooops...Looks like Moody's, the agency that downgraded Greek bonds to junk yesterday, has been quoted as saying 'macroeconomic and implementation risks' as the reason for their downgrade. In other words, they don't believe a word coming out of the Politicos mouths (and rightly so). This comes some months after S&P did the same, but quietly failed to upgrade them after the so called rescue package.

Even the ECB (much to the chagrin of the Politicos) has said it will charge an additional 5 percent premium on the Greek government bonds it accepts as collateral for loans after Moody's Investors Service cut the country's credit rating to non-investment grade. (Ba1 from A3. The highest rating Greek Bonds now have is with Fitches at B+++) The ECB is also applying what is known as a haircut. For those that don't know, a haircut is how much the bank will lend against the face value of a bond, in this case Greek Sovereign Bonds. The haircut applied is 5% meaning the ECB will now only lend €95 out of every €100 of Bonds held by commercial banks. What does this mean? Simply that it decreases the attractiveness of buying those Greek Bonds, especially if, like many, you use those to borrow yet more for further investment. After all, why buy Greek Bonds and tie 5% of your money up when you can buy $ or £ bonds and then recycle for 100%. Apart from which, if the commercial banks want to borrow against Greek Bonds, they will be facing higher premium charges. Not a great set of circumstances for the Greek Govt when it next hits the markets for moolah.

Naturally, the Anti Christ Anglo Saxon controlled money markets are being blamed once more. Not that this doesn't have a modicum of truth. I have been shorting Greek Bonds for some time and I am but a flea on the back of the herd of Elephants all heading in the same direction and that's definitely South on Med countries bond values.

Two German MPs are now saying the Greeks should sell an island or two...Frank Schaeffler, an economics specialist and member of Germany's Free Democrats, said Athens should sell stakes in companies and "assets, such as uninhabited islands". Marco Wanderwitz – a member of Merkel's conservative CDU party – went even further: "If the European Union, and therefore Germany, helps out Greece economically, it will need to give something in exchange … some islands, for example, might be a solution.''

The Bild tabloid newspaper put it rather more succinctly: "We give you cash, you give us Corfu … and the Acropolis too".

Dimitris Droutsas, Greece's deputy foreign minister, was not amused. "Suggestions like this are not appropriate at this time," he told German television....one wonders if he was swinging his handbag at the time.

Sounds like a great deal for the people to me...sell a few islands, then all they have to do is get a revolution going, kick all the self satisfied smug sanctimonious Politicians into Jail and run the country for themselves...they won't do a worse job than is presently being done, that's for sure.

The Greek treasury successfully raised €5bn recently in a make-or-break bond issue, but more than €50bn of Greek debt is due this year – €20bn in the coming weeks – and the country needs to borrow more to meet repayments. If it cannot it will be in default and European banks with Greek investments would be forced into vast write-offs. The problem could then spread to other countries with huge deficits.

Oh my oh my....now what did I say about parity with the Dollar earlier this year????

[PLAYER57832]

ooops...Looks like Moody's, the agency that downgraded Greek bonds to junk yesterday, has been quoted as saying 'macroeconomic and implementation risks' as the reason for their downgrade. In other words, they don't believe a word coming out of the Politicos mouths (and rightly so). This comes some months after S&P did the same, but quietly failed to upgrade them after the so called rescue package.

Ever since I heard Moody's gross underestimate of the Gulf disaster, I am afraid I view everything they say with some distrust.

[Fruitcake]

ooops...Looks like Moody's, the agency that downgraded Greek bonds to junk yesterday, has been quoted as saying 'macroeconomic and implementation risks' as the reason for their downgrade. In other words, they don't believe a word coming out of the Politicos mouths (and rightly so). This comes some months after S&P did the same, but quietly failed to upgrade them after the so called rescue package.

Ever since I heard Moody's gross underestimate of the Gulf disaster, I am afraid I view everything they say with some distrust.

I haven't trusted a word any of the agencies have said since they graded Lehman's at triple A just days before the collapse of said company when it was obvious to anyone with any sense of fiscal management that the whole thing stank to high heaven.

During the days before the end of reporting periods, Lehman's was cross threading its Repo 105 deals to remove illiquid assets from its books and would then use the proceeds to pay down other liabilities. This would lower its leverage ratios and keep investors and ratings agencies happy. A few days later it would borrow more money (on the back of that lower leverage) and return the bad assets to the balance sheet. They used a high profile Law practice in London and their London office to execute the Repo 105s...as soon as this started happening the whole thing really started to smell like a 60 day dead skunk. The shift in assets from sub prime to prime and back was like watching a financial Mack truck go thru a village lane only to back up again a few days later and everything to reassemble as if by magic.

However, I digress, if only to show how completely effing stupid these Credit ratings agencies really are. But for the purposes of this exercise they are a useful tool to have around to ensure the herd keeps rampaging in the direction one wants.

[Phatscotty]

Why didnt Greece just make the cuts 2 months ago, rather than go further into debt?

WHY DOESNT AMERICA JUST MAKES THE CUTS NOW? RATHER THAN GO FURTHER INTO DEBT!?

The cuts required to make a real dent in the debt would need to be so massive, that they will kill a country (Even US of America). If they default on their debts, the are no worse off than if they tried to do something about it.

The (fill in the blank) thing I've ever heard in my life, hands down. I might be dumber from having read that.... may I retort?

1. I think you have forgotten the other end of the debt scenario. Most notably, the creditor???? Did you know that Greece not only owes the money....but there are foreign countries who will DEMAND the payments?

2. You think, after taking those loans, Greece has a fucking CHOICE between cuts or more spending???? They spent themselves into slavery my dear imbecile

3. If Greece actually did take Pedro's advice, and kept spending more money they dont have (where they get the money I do not know, but we're just going with pedro's solution ) The countries that Greece owes that money might get just the TINIEST bit pissed off, and take some sort of violent action?.

[Phatscotty]

No people will tamely surrender their Liberties, nor can any be easily subdued, when knowledge is diffused and Virtue is preserved. On the Contrary, when People are universally ignorant, and debauched in their Manners, they will sink under their own weight without the Aid of foreign invaders. ~Samuel Adams, 1775

[saxitoxin]

Great contributions everyone! Especially Fruitcake - you may win Poster of the Thread!

Scotty, would prefer not to start jaw-bonin' about beer in this thread just yet - thanks, Scotty!

[Phatscotty]

Great contributions everyone! Especially Fruitcake - you may win Poster of the Thread!

Scotty, would prefer not to start jaw-bonin' about beer in this thread just yet - thanks, Scotty!

I know. Sometimes I just can not believe what I am hearing.

I am young yet, and patience will come with time.

P.S. Pedro has a long history of snapping on me while I resisted time and time again. I even still have him foed. Finally, I realize I just need to respond with a bit o brimstone.

[Fruitcake]

Great contributions everyone! Especially Fruitcake - you may win Poster of the Thread

Be still my beating heart...

[Pedronicus]

The (fill in the blank) thing I've ever heard in my life, hands down. I might be dumber from having read that.... may I retort?

1. I think you have forgotten the other end of the debt scenario. Most notably, the creditor???? Did you know that Greece not only owes the money....but there are foreign countries who will DEMAND the payments?

2. You think, after taking those loans, Greece has a fucking CHOICE between cuts or more spending???? They spent themselves into slavery my dear imbecile

3. If Greece actually did take Pedro's advice, and kept spending more money they dont have (where they get the money I do not know, but we're just going with pedro's solution ) The countries that Greece owes that money might get just the TINIEST bit pissed off, and take some sort of violent action?.

Until you understand just how intertwined all these debts are, you should stop posting and making yourself look foolish.

Thursday, 10 June 2010
The facts on East European/Balkan debt - who owes who.
We know who is most exposed to Greek debt. That's France - who are massively, suicidally exposed, followed by Germany. One if not two French banks would be unlikely to survive if Greece defaulted. What would happen to France itself is anyone's guess. But it would not be pretty. France would have to push for a very generous re-structuring.

But who is exposed to the debt of Bulgaria, Romania and Hungary? Well thanks Kerrisdale Capital for compiling the amounts from the always indigestible BIS raw data.

It turns out Austria is almost as exposed to Romania's debt as Germany is to Greece's. Austria is exposed to about €42 Billion. Next most exposed to Romania is... Greece at €25 Billion. Does anyone think Greece could stand to lose even a fraction of that? Or do you think a default by Romania would tip Greece over?

Next on the Romanian default list is Italy. A mere €13 Billion. But again that's €13 billion the Italian's don't have. So I think it fair to say if Romania defaulted we would see Greece implode and Italy be rushed into hiding from its creditors. Greece's demise would then start the chain reaction up to France and Germany as well as finish Italy off.

Tuesday, 8 June 2010
Swiss frank going to force Eastern European defaults.
The Swiss National Bank has for the last month or so been buying up Euros as fast as it could in an effort to stop its own currency appreciating too far. It's interventions in the FX (Foreign Exchange) markets have been spectacular. Their buying doubled to around €230 Billion in the last month or so. But it has failed. The Euro fell to a new low against the Franc.

Unfortunately for most of Eastern Europe most mortgages in places such as Hungary have been bought in Swiss francs. This means that as the Hungarian Florint gets weaker and the Swiss franc gets stronger those mortgages cost more and more to pay off, Then person who has the mortgage gets paid in Florints but what they owe is calculated in Swiss francs. This can only end one way for them.

This is the problem with taking on debts in a currency other than your own. Hungary and the other countries in the same position have now lost control of those debts. They are going to grow as the Franc gets stronger and the local currencies and the Euro get relatively weaker.

[DirtyDishSoap]

Great contributions everyone! Especially Fruitcake - you may win Poster of the Thread

Be still my beating heart...

I know CPR if it comes down to it.

I'm here for you.

[Pedronicus]

Wednesday, 16 June 2010
Spanish Bail Out and the propaganda machine

We are rapidly approaching another massive bail-out. This time of Spain.

Of course it will not be called a bail-out. That is now too contentious a term. It will be called something technical and reasonable, like, a 'European borrowing facility'. It's officially stated purpose will be , 'to facilitate and provide reasonable borrowing terms to EU member states when private debt markets cannot be accessed'. Something like that.

But make no mistake it is another bail-out of gargantuan proportions.

Two signs tell us this is being prepared. First an IMF mission arrived in Madrid to 'work closely' with the Spanish Government, to assess its austerity plans and 'recommend' tougher ones if the IMF and the EU deem it necessary. Necessary to achieve what for whose benefit, is not alluded to. The IMF doesn't make house calls to pass the time of day. It arrives early to show you the instruments of torture and so you can think about how wise it would be to confess quickly.

The second tell-tale sign is the propaganda machine getting into a higher gear. John Monks, former General Secretary of the TUC and now General Secretary of the European TUC (ETUC), was this week treated to a briefing by the President of the EU Commission, Mr Barroso.

Now for those who aren't familiar with Mr Barosso he is firmly on the side of Free-markets, liberalization of markets in poor countries, did nothing to regulate banks either in the run-up to nor during, the present financial implosion, despite his own experts warning him about financial risks, and has been more than happy to comply with/cover-up using Europe for US Rendition flights. In short he's a peach of a man with high moral standards, a sharp and brave, forward thinker who has a deep sense of looking out for the interests of the ordinary citizen over the interests of the monied class. He also would never be swayed by a foreign power to do their bidding over the interests of Europe. Never.

So what did he say to Mr Monks? Well the Daily Mail was on hand to let us know. I don't know who was the mouth-piece in other countries. The Daily Mail is the orifice for disseminating petty moral outrage at ..well everything, the bastion of little Englanders and a shallow short of consumerist, materialist 'I don't know much about it, but I know what I like' view, of what it means to be alive. I think that's fair don't you?

Anyway the Daily Mail was on hand to let us all know that Mr Barosso said that unless the full austerity cuts were implemented in every country where they are needed, without let or hindrance from unions, then we would see a domino effect of countries running out of money and falling prey to military coups and/or - horror of horrors - popular uprisings. The end of democracy and decency and a new dark age. And people would be eating each other's children and the black plague would return and...no actually he didn't say those last things but he will if he thinks it necessary to get you to be afraid enough to comply with everything he thinks must be done.

This is a direct re-run of the build up to passing TARP in the US. Think back to US Treasury Secretary Paulson saying TARP was necessary to "stave off economic Armageddon." Both Paulson and Bernanke were explicit in telling a reluctant congress that the bail-out had to happen without discussion or oversight or people would be put out of their hoses in the hundreds of thousands, all the banks would collapse, the ATM system would stop working and their would be civil disorder. It was passed.

Then we were told how this bail out would fix everything and were then treated to green shoots and recovery. And such has been the recovery that here we are again.

Only this time, the financial world will tell us, its not banks who are in trouble it's irresponsible nations. Who if they are not bailed out with public, ECB money will fail and Mr Paulson's threats - sorry, warnings can be dusted off and waved at the public again.

Look a little deeper. Would Greeks go hungry? Well actually no they would not. Well surely they would not be able to access the bond markets ever again? Well actually Argentinian defaulted and is rehabilitated. But this isn't the issue. If we are contemplating bailing out a broken and dysfunctional financial system and the banks who own it, why not save the cash and use it to lend to Greece after said system is taken to the abattoir and slaughtered? Greece would not need to go to the bond markets. This is a plan that would work. How can I know? Well mainly because it is not that different to what the IMF and Mr Barosso want to see happen. With one important difference. I would put this money into a CLEAN system that had been cleared of its rotting bad debts. They want to put this money into the same failed system that has already eaten and shot back out two or three previous bail-outs. And will shit this one back in our faces if we let it.

Why is the IMF, Mr Barosso and all our financial experts so sure that we must put this money into the present banking system? Well it could be because if we don't and instead let Greece and Spain flush their debt poison out, then Germany would have to bail-out at least one of its largest banks and several of its Landesbanks. France would have top bail out Credit Agricole and possibly Soc Gen. If Spain defaulted as well as Greece, many more banks would implode and would probably be beyond any help.

End of the world? Not quite. Certainly end of the world for those who lent money to the banks that collapse - the bond holders. They would be bankrupt along with the banks whose worthless bonds they would be holding. Would other banks survive? Well, yes they would.

In Greece most banks would be toast. They would be sold for a song. In Spain the Caja's would burn down. That would take out the wealth of a narrow strata of Spanish society. Would Spain and the average Spaniard lament their demise? I don't know. But I suspect Spain and Spanish society might manage without them. And might not descend into barbarism without them. Most of the regionally powerful families would be ruined. Spain's two big banks might survive.

Now here's a thought for you. The pro-bail-out cheering machine is talking about a €700 billion Euro fund at least. This money would be used to buy all the Greek banks bad debts and their nation's worthless bonds as well. It would also fund Spanish banks going forward. Let's step outside the officially sanctioned one-way logic for a moment. Imagine we let the banks die and watch as they took with them all their bad debts. No rescheduling, no saving the bond holders. Their money is used to pay off the debts until the debts are paid or the money runs out. Either suits me fine.

Then once the stench clears a little we take that 700 billion Euros and use a little of it to recapitalize a few new, debt free banks. We could ask the Chinese if they would like to invest in something in Europe that isn't riddled with debt. The rest we take and begin to invest in productive industries.

We are contemplating spending 700 billion Euros, why stick with the belief that the ONLY thing we can do with it is invest it in bankrupt and dysfunctional banks? Why not invest that money in something that works? Something that might employ people to make or do something that will actually have a future?

At the moment we are being told and will soon be bullied not told, that the only thing we can invest in is banks. And we are being told this by the people who own the banks, who lent the banks their money and the political class who are often the same people or hoping to get a plush sinecure form them upon being voted out of office. WHY BELIEVE ANY OF THEM?

They have no reason to tell you the truth and million and billions of selfish reasons to lie to you.

Instead of being bullied by those who are massively in debt and facing certain ruin, we should be focussing clearly on the real question - what do we want to invest vast sums of public money in? Bankrupt banks and a corrupt political elite who serve them, OR something productive?

Think clearly now before the din of propaganda lies and bullying gets too loud to hear yourself think.

[2dimes]

Two German MPs are now saying the Greeks should sell an island or two...Frank Schaeffler, an economics specialist and member of Germany's Free Democrats, said Athens should sell stakes in companies and "assets, such as uninhabited islands". Marco Wanderwitz – a member of Merkel's conservative CDU party – went even further: "If the European Union, and therefore Germany, helps out Greece economically, it will need to give something in exchange … some islands, for example, might be a solution.''

Now we're getting somewhere. I fear this is not the sweet deal on mediteranian property I'm looking for just yet.

[Fruitcake]

I see the haircut (mentioned by me on June 15th originally) given to banks holding Greek bonds has now risen to between 15% and 20%.

I wait with baited breath for the so called stress tests results that are due 23rd July. It is not without a little amusement I see they are going to be published in London. Private investors are way ahead of the herd (more commonly known as Euro Banks) and are pricing in a 50% haircut on longer dated Greek Bonds. The number for Spanish long dated bonds is 30%. It is not rocket science to work out that as these bonds are widely held by all Euroland banks a haircut of this size would leave few of them looking solvent if the correct stress test was applied. Reports are that the ECB is not buying Spanish Corporate bonds now.

Germany, the mighty centre of the moolah is starting to suffer as private investors start to review the exposure the German Banks have to euroland Bonds, reports are that even a 3% haircut on sovereign debt would leave German banks with around €47 bn of losses.

Autumn is just over the horizon....and all the trouble brewing will spill over then.

[Phatscotty]

I see the haircut (mentioned by me on June 15th originally) given to banks holding Greek bonds has now risen to between 15% and 20%.

I wait with baited breath for the so called stress tests results that are due 23rd July. It is not without a little amusement I see they are going to be published in London. Private investors are way ahead of the herd (more commonly known as Euro Banks) and are pricing in a 50% haircut on longer dated Greek Bonds. The number for Spanish long dated bonds is 30%. It is not rocket science to work out that as these bonds are widely held by all Euroland banks a haircut of this size would leave few of them looking solvent if the correct stress test was applied. Reports are that the ECB is not buying Spanish Corporate bonds now.

Germany, the mighty centre of the moolah is starting to suffer as private investors start to review the exposure the German Banks have to euroland Bonds, reports are that even a 3% haircut on sovereign debt would leave German banks with around €47 bn of losses.

Autumn is just over the horizon....and all the trouble brewing will spill over then.

The stress tests here in the US was a pony show, and a tool to bust out non-cooperative banks, especially local/community banks. We are approaching 90 bank failures so far this year, right on track with depression statistics from the FDR days

[jimboston]

I know a collapsed Euro will hurt US exports... but I want to go to Paris again, and I need a better exchange rate to justify the trip.

Plus... in addition to the exchange rate, if they are feeling a little more exconomic distress the cost for hotels, airfare, ect. will all be depressed as well.

[Fruitcake]

I see the haircut (mentioned by me on June 15th originally) given to banks holding Greek bonds has now risen to between 15% and 20%.

I wait with baited breath for the so called stress tests results that are due 23rd July. It is not without a little amusement I see they are going to be published in London. Private investors are way ahead of the herd (more commonly known as Euro Banks) and are pricing in a 50% haircut on longer dated Greek Bonds. The number for Spanish long dated bonds is 30%. It is not rocket science to work out that as these bonds are widely held by all Euroland banks a haircut of this size would leave few of them looking solvent if the correct stress test was applied. Reports are that the ECB is not buying Spanish Corporate bonds now.

Germany, the mighty centre of the moolah is starting to suffer as private investors start to review the exposure the German Banks have to euroland Bonds, reports are that even a 3% haircut on sovereign debt would leave German banks with around €47 bn of losses.

Autumn is just over the horizon....and all the trouble brewing will spill over then.

The stress tests here in the US was a pony show, and a tool to bust out non-cooperative banks, especially local/community banks. We are approaching 90 bank failures so far this year, right on track with depression statistics from the FDR days

And this after some 140 failures in 2009.

Wonder what the spread is on Fannie and Freddie being:
1) Broken up
2) dissolved entirely
3) allowed to keep swallowing huge amounts of moolah (around $145 billion and counting since collapse in September 2008)

Back in the never-never land of the Euro, on Thursday Greek workers went on strike against government plans to raise the pension age and reduce benefits as demanded by the EU/IMF package. Despite it being the start of the high season for tourism, 20% of Greek GDP, the strikers shut airports, railways and ferries....

Another Greek air traffic controllers strike is set for Wednesday, 14, July, 2010, for 24 hours. Added to this, another general strike is called for 15, July, starting 11am till the end of time!

[Fruitcake]

According to the latest data from Lipper FMI, both equity and money market funds saw redemptions this month, with money market funds alone responsible for redemptions of €14.7bn over the month, despite them normally being seen as a safe haven during more a turbulent market environment.

The redemptions in money market funds recorded by Lipper (a Thomson Reuters company, global leader in supplying mutual fund information and fund ratings, fund analytical tools and fund commentary) are in stark contrast to the global figures provided by EPFR Global for the first week in July which show an inflow of $33.5bn – a 78 week high for the money market sector, indicating perhaps a marked improvement in investor confidence since May.

The only major asset classes unaffected by the exodus were the mixed asset and bond categories, although both saw their net inflows drop to the lowest points since this time last year (bond +€5.6bn, mixed +€3.4bn).

In addition, investor reaction to the potential vulnerability of some regions was evident – European bond funds were redeemed heavily, with the European short-term bond sector seeing net redemptions of €2.3bn while emerging market bond sales also slowed on less positive regional news but still took €357m.

Overall the best selling sector for the month was German equities, with net sales of €6.5bn, despite the DAX falling by 2.8% during May. The top five funds in this sector were ETFs, possibly suggesting savvy investors buying when down, but also some short-selling distortions. The best seller was iShares DAX with inflows of €4bn, beating its homegrown competitor ETFLab DAX by €2.2bn.

Reported in the FT today was the debacle of yesterday's Greek bond issue. Scaling back from 12 months to 6 (term) and approximately halving the quantity (due to no real takers) they just managed to offload the 50% reduced issue,but that's not the end of the story. Even at just 6 months maturity the Greeks are now paying 4.55% up from 1.38% in January. They would have liked to issue at 12 months but were not prepared to pay the rate the market would demand. 10 year bonds are yielding around 10.5% now, slightly down following some interestingly helpful long term bond purchases. Problem is that tax revenues are heading south big time as the EU/IMF fiscal reforms take hold.

The bond terms are getting shorter, the rates higher....and the end game wont be far away. One can almost see the ever decreasing circles as the EU tries, vainly, to keep the Euro intact as it is....ha!

[2dimes]

Semi serious question. Are you setting things up on your island?

I would have liked to set up an island while things were peachy. Doesn't it look like you might need it in a couple of years?

[Fruitcake]

Semi serious question. Are you setting things up on your island?

I would have liked to set up an island while things were peachy. Doesn't it look like you might need it in a couple of years?

Still at the same point dimes. I am working so hard these days I have little time to progress any other project.

As for needing it in a couple of years, I think not, there is still far too much money to be made and assets amassed from the assinine stupidity of Euroland politicians.

[2dimes]

There will allways be money to be made. I was thinking more about hiding from the hungry people trying to climb in the window to check out your pantry between riots.