Friday 9 March 2012

Greek Denoument

Crisis Over.

In the end simple really, get the ECB to declare it can;t take any losses, agree there to be no restructuring of any Sovereign bonds and impose instead of this a 75% loss on £125 billion of private sector loans. Why should Government's face losses when their are private market players to mess with?

Hey presto, the Greeks are saved and can be lent money by the Eu to help them push austerity further onto their Country which has a currency 20% overvalued and youth unemployment at over 50%.

All is well, Merkozy have completed their work.

What can possibly go wrong now?


Sean said...

Are we having a sweep on when the Greeks will be back for bailout No3?

Where did they get this 120% gdp debt number from?...Wait a minute is that Italys debt number?

Tearing up contracts thats a good way of getting folks to buy your debt is it not? I get the every bond holder in the world is reading the small print of their contracts to make sure its CAC proof, everyone in the future will have to be.

Budgie said...

What can go wrong?

Well, the fact that the ECB, behind everyone's back, swapped their Greek bonds that were liable for the haircut, for new bonds exempt from the losses, means that no private bond holder can trust the ECB. Indeed no one can trust the ECB.

The ECB's action tears up contract law into little pieces and throws them away. Of course, the Greek CAC is important, as Sean says, but it really only formalises the Greek default. As such it will hit confidence in Greece. The ECB's short sightedness, however, hits the entire eurozone.

We will find out later today (perhaps) if the issuers of CDSs will honour their obligations, or weasel their way out. If they do, they will be the only ones; if they do not then it will complete the shambles that will affect us for decades.

All to protect the euro, and the euro elite, at any cost, as I previously warned. And Portugal is next. And Greece will return.

Bill Quango MP said...

the first time we had a sweep on can kicking it was 6 months before it needed another big boot. IIRC the last time we did it the 10 day choice was the winner.

Sebastian Weetabix said...

Since the EU as a whole seems to follow the Napoleonic ideal of the law being subject to the government rather than the other way around, I daresay we shouldn't be surprised that they couldn't give a flying f*** about contract law.

Next steps: printing more money because no one will buy sovereign bonds in the Eurozone, and/or compelling pension funds to buy them in ever vaster amounts (aka nationalising private pensions).

Budgie said...

BQ, if I read the Telegraph correctly, the new Greek bonds are already priced at distress levels, so a fresh default is expected. 10 hours?

Budgie said...

SW, exactly so. But Draghi has already issued more than Eu 1 trillion LTRO. That is ECB invented money.

andrew said...

it is always not what you expect

i go for the can got kicked at least 1 year

also, we now have a template for a controlled default that isn't a default so the market now knows what to expect with spain / portugal / etc

less uncertainty = more optimism

did anyone else read hey presto as hey pesto?

Sebastian Weetabix said...

@Budgie - that trillion is just a drop in the derivative filled ocean and arguably necessary to prevent a collapse in the money supply. They haven't even started yet.

Anonymous said...

One thing that puzzles me.....
Are any of these bonds sold directly to the public or are they all corporate ?
For example the NSI in the uk is backed by the treasury and sells / offers 'bonds' direct to public in the form of savings accounts.
I'm guessing Greece has a similar arrangement ?
If the uk were in the same position would this sovereign debt be able to devalue the nsi ?

rwendland said...

Amazed to read China has swung into a large $31.5 billion trade deficit in Feb. In part due to the Chinese New Year holiday, but I'm still amazed as so contrary to usual Chinese news reporting. Any Capitalists@Work views? Is it a step to a nice soft landing, or a cockpit warning siren?

Electro-Kevin said...

I always find Budgie's comments inspired.