But we were told this was just a little bailout, remember? And that it wouldn't be of material consequence or size, right? So....what's this?
In a preview of a story to run Monday, the German magazine Der Spiegel said on its web site that the package — the equivalent of $145.2 billion — could be necessary if the economically ravaged nation continued to rely on foreign aid through 2013 and 2014. That comes on top of the 110 billion euros, or $160 billion, in bailout funds agreed to last year.
At what size does a bailout package become "material"? Is not $300 billion, roughly, in that range?
And remember, this is Greece - a small nation with a "small" problem. What of Ireland, Portugal, Italy and.... Spain?
Seventeen governments in the zone will seek longer maturity from creditors for Greece’s debt. The process is to begin as early as July. A new Greek aid package is expected to be approved by Euro finance ministers at a meeting on June 20.
Ah yes, "seek." This is an attempt to avoid triggering the Credit Default Swaps that we know the banks had written against this debt. Well, that's nice. Now about those swaps and the number of them compared to the actual bonds outstanding..... and whether anyone had capital adequacy to pay them. They didn't, right?
Standard & Poor's Friday said in a report that for issuers rated at Greece's level, single-B, a "voluntary" debt exchange would likely be default if creditors received securities with terms less favorable than are available in the secondary market. With 10-year Greek debt yielding 15% in the secondary market and two-year debt yielding over 20%, that is almost certain to be the case under the exchange process planned by euro-zone governments.
Officials say that they are willing to accept a downgrade of Greece by the credit-rating agencies due to the exchange offer—so long as a "credit event" that would require payouts to holders of Greek credit-default swaps isn't triggered.
Of course it's a default - "take this bond with less-favorable terms in exchange, or we don't pay." That's very much identical to sticking a gun in someone's face.
Now how you keep that from being a "credit event" is beyond me. More to the point, why is it that four years into this mess we have as citizens - not just here but worldwide - failed to demand that these swaps and other instruments be exchange traded and that capital adequacy and margin be proved, in cash, on a nightly basis?
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why is it that four years into this mess we have as citizens - not just here but worldwide - failed to demand that these swaps and other instruments be exchange traded and that capital adequacy and margin be proved, in cash, on a nightly basis?
Because 99% of the population is utterly clueless about the nature (and probably even the existence) of these instruments?
-Uwe-
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“Whenever the legislators endeavor to take away and destroy the property of the people, or to reduce them to slavery under arbitrary power, they put themselves into a state of war with the people, who are thereupon absolved from any further obedience.” - John Locke
but some people in some countries have been protesting. Not that they are aware of the swaps but more from the austerity measures being forced on the people that they don't want.
I know that within my circle of family and friends, they have no clue. They are happily spending money buying the latest tech gadgets, other stuff, new cars, houses, and taking exotic vacations. They are still living as if the bubble will never burst.
I worked at a company that used that tactic to burn down it's debts.
"Look, we're having financial difficulties (we don't want to cut our execs pay 80% and our payroll itself 40% so we can continue to be in business) so we can give you 10% now and we call the debt paid off or you can sue us and force us into bankruptcy and maybe see how that goes."
Then they turn around to their investors "HEY our debts went down look at us we're almost profitable!!!!"
Lots of places took the 10%. Oh, their AP put a freeze on the accounts, permanently. T'was a B!@$!@$!@# to get new accounts set up under the new company name being at the same address once the place declared bankruptcy.
Case in short guys, audit your AP monthly. A companies outstanding AP to you should be a % of a companies orders or revenue generated (in my case they were a retailer so we'd buy on 90-net and receive the product and, uh, yeah).
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If (rate of inflation) * (total unencumbered currency) > (total unencumbered currency) per year; the difference is guaranteed to default per year. Covering the difference via debt causes exponential inflation; Interest reaches unsaleable levels, monetary base contracts, then collateral values and banks collapse.
Well here we are again, taking in premiums of CDS without the ability to pay on a default. This is exactly why they are trying to avoid a Greek default. The way I see it is we could have a systemic failure at any moment. I really don't think the Greek people are going to stand for international tax collection and the sale of assets. I could be wrong but when you having nothing to lose then you rise against your government.
Correct me if I'm wrong but the storm brewing appears to be much larger than the one that blew Lehman away back in 2007.
Ya know, when you look at the current batch of financial problems plaguing the nations of the world it sure looks like only a matter of time before we really have a global financial meltdown. I mean how long can the games be played, how long can the plates be kept in the air?
I have to pinch myself sometimes because it's just surreal that the world has gotten to this place in time where fraud, greed, lying, stealing are so pervasive.
If you were to sit down with two sheets of paper and make a list of financial landmines for just Europe & the U.S it would be mind boggling. How the world comes out of this unscathed is beyond me. Total financial collapse is in the cards and not out of the realm of possibilities.
Anyone with a brain has known that writing CDS instruments was adding fuel to the fire. What's that saying again about a hole?
Of course, if your bonus depends on writing swaps my crystal ball says swaps will be written. Continued writing of CDS = financial armageddon = nuclear playtime.
Been nice knowin' y'all if that happens
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bilge My playbook speaks español. Deal with it. Im too lazy to fix it.
The plan is to print it all up and give all the new money to the bankers, which would make them staggeringly rich compared to the rest of the world and its effective rulers.
Guydaley
Posts: 15320
Incept: 2007-07-10
Wyoming only ATM
Banned
Quote:
More to the point, why is it that four years into this mess we have as citizens - not just here but worldwide
The only thing that gets the FSA excited is when their freebies are threatened. Same thing for heroin and cigarette addicts. They aren't going to bitch about something they don't know or care about.
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Its called creeping TEOTWAWKI. Just because it doesn't happen all at once doesn't mean it isn't happening.
My memory is a little weak on this, but wasn't the Greece Fire problem thought to be closer to, like, $75B only this time last year?
And if so, isn't the fact that this bailout is nearly 2x that size as clear an indication as anyone - even Idol America - would need to recognize that the problem is getting worse and not better?
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The preservation of liberty depends upon the intellectual and moral character of the people. As long as knowledge and virtue are diffused generally among the body of a nation it is impossible they should be enslaved. - John Adams
Bozonian
Posts: 19889
Incept: 2007-09-01
Saratoga Springs, New York
Is there a video that I can show people that explains Credit Default Swaps and especially showing how much CDS liability is stacked up on top of how much actual debt?
They'll print money. Why? Because it's what is required to save the big institutions that call the shots. The little people? Well, they may be a problem if an actual revolution occurs but a lot of the people at the top have mobility and can just move most of their wealth somewhere else while their home country implodes.
If governments could not confront the problem a few years ago when it was much smaller, what makes you think they'll do it now when it's even more difficult?
The current market tantrum is just some big players "demonstrating" to Congress what will happen if the punch bowl is taken away. It's a threat, issued early enough to make "those **********s we bought last election do what they were paid to do".
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Forget about blaming, fighting with, or crediting other people. The only real challenge in life, is with yourself. -- Me
Everything I write is my opinion and not to be considered proven fact. Nothing I write should be considered financial advice.
CT1977. Exactly. Watch the interview with Gonzalo Lira on Max Keisers show from last week. They will NEVER pay this back. That was BEFORE the new 130+ billion they need. Amazing ****. They are spiralling faster than I ever imagined...
If Bucky doesn't skyrocket now that all of this Greece news is out, he may never recover...
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"And in knowing that you know nothing, that makes you the smartest of all." - Socrates
Caging the swap derivatives market by having the counterparties meet certain margin requirements sounds like a good idea. The problem with this caging right now is that it'll cause a major upward trajectory on the pricing of RISK in the financial markets. That higher RISK pricing will force interest rates higher, especially on subprime lending. The problem with not caging this beast is that we're excaberating the problem into an even greater mess as Karl Denninger has well-documented here and on previous tickers/postings. Unfortunately I don't think there is the political will to really solve this problem until it has some major correction. As a loyal American the only comfort I take is that it'll probably detonate and explode in Europe worse than it will here and thus we might solve it here before it's too late. However I'm not counting on our leaders to fix it. I'm getting prepared for a meltdown possibility that'll lead to 25%+ unemployment, home prices collapsing in half, the federal government being forced to take huge austerity measures, and special assessments/taxes being used to confiscate huge percentages of property.
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3/17/2013: Bullish on nothing - 100 percent in cash.
Caging the swap derivatives market by having the counterparties meet certain margin requirements sounds like a good idea. The problem with this caging right now is that it'll cause a major upward trajectory on the pricing of RISK in the financial markets. That higher RISK pricing will force interest rates higher, especially on subprime lending.
Good.
Risk should come with a higher coupon demand. In fact, the coupon demand must, mathematically, always be higher than a true 'risk free' price, which in turn is (modestly) higher than growth.
Why? Because nobody works for free, that's why, and nobody intentionally lends at a loss.
It is the FANTASY of being able to lend at what APPEARS to be a negative real rate that drives these bubbles. If you get PAID to borrow, of course you will borrow right up until someone cuts up your line of credit. The problem is that you can't get paid to borrow - there is ALWAYS a fraud in there somewhere, because again, nobody INTENTIONALLY lends at a loss.
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I don't care if it makes sense -- only if it makes money. -- Me Bank (n): See scam, fraud and theft.Eat a bankster -- they're low-carb. What part of "shall not be infringed" was unclear?
Bohemian
Posts: 9658
Incept: 2010-07-27
California
Iceland gave everyone the roadmap, so why governments in the EU don't read it is beyond me.
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"The politicians are put there to give you the idea you have freedom of choice. You don't. You have no choice; you have owners. They own you. They own everything." - George Carlin
Credit default swaps ought to require 100% backing or they should be illegal. This domino-chain default scenario is economic terrorism, pure and simple.
If we do (or DID) the "nightly" proof, the system will (and would have in the past) implode instantly. These things look like, walk like, taste like and smell like "INSURANCE" and should be regulated as "INSURANCE."
But alas, they are not (and have not). So, when the hurricane comes, it blows up the idiots who BOUGHT this "INSURANCE" and the idiots that backed those that bought this "INSURANCE." Oh well...
Bohemian
Posts: 9658
Incept: 2010-07-27
California
Greece being buried alive in debt.
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"The politicians are put there to give you the idea you have freedom of choice. You don't. You have no choice; you have owners. They own you. They own everything." - George Carlin
The derivatives are just a scheme where the banks sell this insurance to each other so that they can do one thing, increase leverage, By being able to insure the risk, they are able to lower capital requirement and operate at higher leverage. Don't look for any transparency in this bankers market anytime soon. The reason AIG sold the derivatives to European banks on the MBS was not to insure it for themselves but to be able to carry the assets on the books at much higher values and thus they were able to lend more money against the MBS they held on the books.
If Greece defaults, it can potentially start to expose the scheme of money creation and bring in to question current practices of insured risk that has no backing behind it.
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Dear Euroland: Relax, Germany has a plan for your money!
Political Capital Defined: We are out of money but will tax our citizens for whatever it takes to "SAVE" the Euro.
But that number includes 15% deficit spending IIRC. Remove the deficit spending from the equation and you can see how truly ****ed Greece is. The Greek GDP contracted 10% alone this year. So in reality it contracted 25% more or less when the .gov over spending is pulled out. They really are ****ed. There's no way to get their economy going again without serious changes in their living standards which they'll do only at gunpoint.
I guesstimate about $3-5t of swaps are written against the Greek debt. Maybe more, maybe less, but my point is there is nothing backing the paper like most others here know and have written.
We should use this to recognize that every damn GDP print worldwide is bull**** unless you remove the .gov deficit spending from the equation. Every one. It would appear the entire 1st world is hopelessly in a depression and has been since the crisis started.
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bilge My playbook speaks español. Deal with it. Im too lazy to fix it.
why is it that four years into this mess we have as citizens - not just here but worldwide - failed to demand that these swaps and other instruments be exchange traded and that capital adequacy and margin be proved, in cash, on a nightly basis?
Why? Because this would happen...
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To err is human. To really **** things up takes government.
Ktrosper
Posts: 1500
Incept: 2010-04-06
ft collins co
Online
Bobinator wrote..
"Look, we're having financial difficulties (we don't want to cut our execs pay 80% and our payroll itself 40% so we can continue to be in business) so we can give you 10% now and we call the debt paid off or you can sue us and force us into bankruptcy and maybe see how that goes."
LOL, a page right out of Donald Trump's book ;)
Gen wrote..
Because nobody works for free, that's why, and nobody intentionally lends at a loss.
When laws are enforced, you're right. When lenders have a way to offload the chocolate-covered-****-balls before the loss is realized, reaping fees and bonuses along the way, they definitely seem to knowingly lend at a loss.
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The unexamined life is not worth living.-Socrates The only stable state is the one in which all men are equal before the law.-Aristotle Liberty exists now in the spaces government has not yet chosen to occupy.-Doc Zero I anticipate that 10 Dallas Cowboys Cheerleaders will blow me this evening.-K.D
Am I right in thinking that what Karl is saying here is just like the US mortgage bubble, someone with inside information has managed to take out a whole load of CDS bets of a Greek Default (Goldman I would wager), and that the banks in Europe are on the other side of that bet, and they are all going to blow sky high if there is a credit event?
Perhaps special legislation should be enacted in the Parliaments of Europe to make the CDS's null an void, perhaps even make them illegal, and tell the winners of the bet to shove it?
