CDS is talked about like this 3 letter abbreviation is the only problem. I know there are trillions in OTC Derivatives. Put any 3 letter abbreviation on it you want. If Greece defaults, some will trigger and it is possible the financial system will collapse(fast crash ??). I also believe this is the primary reason ALL the financial elite have not allowed Greece to officially default and continue to throw billions down the Greek rat hole. IF the OTC Derivatives trigger, ALL the financial elite get to share in the fun.

This is not rocket science - If it looks, walks, sounds and smells like a duck .....

To anyone who can answer this, assume for the moment that Greece doesn't blow up the Euro. Given the massive expansion of the ECB's balance sheet via the LTRO, is this really backdoor QE (they are the end holder of soverign debt, with the added "advantage" of funnelling money to the European banks to a much greater extent than the primary dealers received by front running the Fed's bond purchases) what is to stop them from continuing and averting a catastrophe? Admittedly it is can kicking, but why can't it occure for a long time? The Euro gets weaker, but that could change on a dime if a: the fed resumes QEwhatever or b: the charts change and shorts get sqeazed as the talking heads proclaim that the Euro should be stronger because the crisis has been "averted". As long as Spain and Italy can get funding indirectly via the LTRO, why do they have to leave the eUro or default? Prior to the LTRO, the view was that the Germans and other Northern European countries would not allow "money printing", but now that it is being done indirectly through the LTRO, no one seems to care. Teh analogy isn't perfect, but it reminds me of the Republican leadership that allows the debt cieling to be increased as long as they are allowed a "show" vote so Republicans can claim to teh people back home that they were against it.

I really am looking for an answer as to why and when the LTRO fails to result in taking off the pressure on the Sovereign's funding requirements. Most of you are a lot more knowledgeable about how this stuff works than I am, so I am hoping for some help in understanding exactly why this won't work. As long as the Germans don't object and the ECB is willing to expand its balance sheet, why can't the can continually be kicked down the road (and from the banks pespective, if I am already loaded up with soverign debt, why not double down for the carry trade? If it is basil requirements taht are the problem, won't they simply be relaxed if the banks are helping to bail out the soverigns?

Intuitively, I understand that you can't continually pile up debt indefintely, but I am deeply confused as to how this plays out. If feel like it is similar to the yen, where everyone acknowledges that teh debt is unsustainable and that either the yen or JGB's must crash, and yet year after year the implosion fails to happen. Maybe there is no way of knowing what the trigger will be, but I hate teh argument hatt eh triggering event can only be known in hidsight. It smacks of the Greenspan/Bernanke whocoundknowedit argument taht only a half a dozen people were able to profit off the housing bust. Anywya, sorry for the long post, but I am really hoping someone can enlighten me on this. Thanks in advance.

The PIIGS debt crisis is dry run for the bigger crises to come with France and the UK; both are borrowing to spend beyond their means.

Eventually the US$ will no longer be seen as a safe haven. Ka-boom.

It wont be the end of the world, but it will be miserable.

Questions for the informed.

1)It is safe to assume that Greece is not issuing any new sovereign debt at 400% interest rates.

2)So what do they do as this stuff matures?

3)Do they pay it off with new ECB and IMF loans? Probably not or there would be no discussions of haircuts.

4)And what are the interest rates on the ECB and IMF loans?

1. Yes.

2.

3. They have to or else. That's the problem -- they have paid the rolls thus far but there's a big one coming in March and the IMF/ECB can't fund it. Either they solve this problem with the haircuts or again we have

4. Near zero.

The problem is the rolls.

This, ultimately, is ALWAYS the problem, and it will come here.

KD wrote-

Quote:

This, ultimately, is ALWAYS the problem, and it will come here.

But that won't be a problem for *us* since we haven't dramatically shifted our borrowing to the short end in the past few....oh, ****.

Speaking of CDS's, Kyle Bass said in an interview there were only $6 billion in CDS's on Greece and that most of them were owned by banks. The trade on Greece to my understanding was a short on their debt and a long on something like German bonds. The spread at one time was less than 15 bps. It was a fish in the barrel trade.

I wish this was merely a European sovereign debt crisis. It is a debt crisis in general. People keep talking QE, but all QE does is put more money on the debit side of the banks in place of other assets. Whether the banks make more loans (they don't need more reserves to make more loans, but instead need to acquire more reserves or some exchange in credit if they do make more loans) or not is beside the point. I believe the banks are speculating with the additional liquidity, which is why you see stocks, bonds, oil, gold and other assets move in unison. If they buy more debt on the market, they merely participate in an insolvent system. If the government debt buildup slows, the rest of the debt structure also loses support.

Here is a good article about the potential mess that would follow an exit of Greece from the Euro. http://www.acting-man.com/?p=13203&c....

Quads, that is the reason there was a bailout in the first place, hoping to restore the market. The finger in the dike procedure clearly didn't work. When the run on the Euro hits, they will suddenly figure out what they have done since won't work either.