FLASH: Greece Deal Supposedly Made in [Market-Ticker]

Posted 2012-02-20 22:07
by Karl Denninger
in Flash

FLASH: Greece Deal Supposedly Made

Supposedly €130 billion and allegedly will get debt-to-GDP to 120% by 2020.

Not gonna happen folks. This is basically the same deal originally talked about last year and the problem is that it doesn't account for the contraction in GDP when the deficit spending ends, nor the impact on tax receipts.

This may get them through the March date (they'll just suck down the funds and prevent a blowup on the imminent roll) but this is entirely insufficient as there are still the issues surrounding the banks and the pass-through effects are not accounted for.

More as I learn it, but my first blush is that while the reflexive move is northbound on the Euro and the incipient dump in the futures was arrested, people need to think this one though before breaking out the party hats.

Discussion below (registration required to post)

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User Info	FLASH: Greece Deal Supposedly Made in forum [Market-Ticker]
Mannfm11 Posts: 3556 Incept: 2009-02-28 DFW, Tx	Surely Greece isn't stupid enough to re-organize and still be broke? 120% of GDP is broke, which begs the question, why are they negotiating for debt peonage of their people? Is it merely one more case of a government screw job on the people of another country? ---------- The only function of economic forecasting is to make astrology look respectable.---John Kenneth Galbraith 2012-02-20 22:15:17 Permalink
Medicdan Posts: 8029 Incept: 2010-02-11 Scottsdale, AZ	Interesting. I spoke to someone from Greece last night with lots of family still there. He claims they all want out of the Euro. ---------- Arizona & desert gardening http://azediblegarden.com/ 2012-02-20 22:15:52 Permalink
Asimov Posts: 104066 Incept: 2007-08-26 East Tennessee Eastern Time	Quote: The report said that deal discussed by Greece and private creditors, represented by the Institute of International Finance (IIF), envisaged a 50 percent nominal reduction in the value of their holds of Greek government bonds. Of the remaining 50 percent, investors would get 15 percentage points paid in short-terms notes issued by the euro zone bailout fund, the European Financial Stability Facility (EFSF) and 35 percentage points in 30-year bonds amortizable after 10 years. The coupon on the bonds would be 3 percent between 2012 to 2020, then rise to 3.75 percent from 2021 until maturity. Investors would get an additional interest payment linked to Greek GDP growth, which however, would be capped at 1 percent of the outstanding amount of new bonds. "The creditor participation rate is assumed to be 95 percent," the report said. For every 5 percent decline in the participation rate, the 2020 debt-to-GDP ratio would climb by 2 percent. http://www.reuters.com/article/2012/02/2.... They just announced that they're even more ***ed than we thought they were. And we rally? ---------- It's justifiably immoral to deal morally with an immoral entity. If you trade based on what other people say, you will* lose money. Especially what I say. I won't be held responsible. Festina lente. 2012-02-20 22:21:27 Permalink
Asimov Posts: 104066 Incept: 2007-08-26 East Tennessee Eastern Time	Keep in mind the greek 1 year hit 666% (not a typo) yesterday. ---------- It's justifiably immoral to deal morally with an immoral entity. If you trade based on what other people say, you will lose money. Especially what I say. I won't be held responsible. Festina lente. 2012-02-20 22:22:14 Permalink
Marvinmartian Posts: 754 Incept: 2011-03-16 Pasadena, CA	As I understand it, this establishes at least two seniority levels of debt. ECB and private. ECB gets no haircut, private holders take the haircut. That means CDS triggers go off. Thats a big difference from other deals before now. Mannfm11 has a good point. If you are going to default, why not make it useful and go BIG? 2012-02-20 22:22:40 Permalink
Irishblues Posts: 290 Incept: 2010-12-18 Wisconsin	When you hear that Greece is saved, you can safely assume that everyone but Greece is being saved. Portugal, Ireland, Spain and Italy better be looking very closely at what Greece is going through and ask themselves, "do we want to see our society go down the crapper as well?" 2012-02-20 22:53:36 Permalink
Hstella Posts: 284 Incept: 2009-08-18 Colorado	Marvin, could you please explain to me why the cds will be triggered with this iteration? Logically imho the cds should have triggered long ago. It seems to me that the isda has simply declared that the cds would not pay out "because we said so" and is made up of cds writing banks. For me this whole thing went from tragic to farcical about six months ago, and I just can't make sense of all the tortuous reasoning anymore. Thank you for any clarity that you can bring. 2012-02-20 23:00:29 From PDA Permalink
Steinbeck Posts: 115 Incept: 2009-03-04	I suspect the rocket ride in markets will fizzle before the open as the details become clearer. The half-life of these stick saves just isn't quite what they used to be. 2012-02-20 23:10:53 Permalink
Zarathustra Posts: 5961 Incept: 2009-04-29 Funkytown	Cue the..........................wait. What? ---------- "And in knowing that you know nothing, that makes you the smartest of all." - Socrates Last modified: 2012-02-20 23:19:16 by zarathustra 2012-02-20 23:18:57 Permalink
Flappingeagle Posts: 1229 Incept: 2011-04-14	Quote: Interesting. I spoke to someone from Greece last night with lots of family still there. He claims they all want out of the Euro. Well tell your friend to tells his family to get all of their money out of the banks, and to put it in the Greek version of mason jars. But be sure to keep it in Euros. Once Greece defaults, goes to the Drachma, then devalues like hell those Euros will come in handy. Hell, if they have enough physical Euros they might come out of this richer than when they went in. Flap ---------- Here are my predictions for everyone to see: S&P 500 at 320, DOW at 2200, Gold $300/oz, and Corn $2/bu. "You can't build a house of cards on a shaking table." - Tony Johns The January 2015 AMZN put at $130 (cost $4.25) will be a winner. Last modified: 2012-02-20 23:33:07 by flappingeagle Reason: bad typo 2012-02-20 23:32:30 Permalink
Asimov Posts: 104066 Incept: 2007-08-26 East Tennessee Eastern Time	The euro is doomed. If they have to bury money, I'd go for swiss francs, but only because I'm quite sure they'll still have SOME value 10 years from now. ---------- It's justifiably immoral to deal morally with an immoral entity. If you trade based on what other people say, you will lose money. Especially what I say. I won't be held responsible. Festina lente. 2012-02-20 23:48:02 Permalink
Hstella Posts: 284 Incept: 2009-08-18 Colorado	Who on Gods green earth would take 30 year bonds from greece yielding 3-4%? That's a special kind of stupid. Would there even be a secondary market for that kind of trash? If I were a creditor I would want whatever of my "thrown down a rat hole" money I could get back in my hot little hands ASAP. Somehow I think that a dime on the dollar in cash in my possession is worth more than 35 cents in the hands of the greeks/ bureaucrats / banksters. 2012-02-20 23:52:57 From PDA Permalink
Templar223 Posts: 779 Incept: 2008-04-28 Champaign, IL	Heck, I read somewhere today they would need something like a third of a trillion dollars just to keep this farce going for a few more years. And somewhere else said that even if this deal passes, the powers that be expect a re-default in two years or less. And just how in the blue blazes are the people of Greece gonna pay all that back? They're not. This is going to be amusing to watch. John 2012-02-20 23:59:25 Permalink
Throxxofvron Posts: 10339 Incept: 2009-02-17 Hyper-Speculative Psycho-Facsistic Parabolic Blow-Off	I think that the Idiots at the 'Troika' just had their hand called -and No One seems to see this for what it is. http://www.zerohedge.com/news/presenting.... ---------- DIONYSUS: " Thou hast no knowledge of the life thou art leading; thy very existence is now a mystery to thee. " -from 'The Bacchantes' By Euripides During times of universal deceit, telling the truth becomes a revolutionary act. -George Orwell Last modified: 2012-02-21 00:06:40 by throxxofvron 2012-02-21 00:04:19 Permalink
Luvs_footie Posts: 2423 Incept: 2007-11-26 Australia	Greece Wins Bailout as Europe Chooses Aid Over Default Debt-stricken Greece won a second bailout after European governments wrung concessions from private investors and tapped into European Central Bank profits to shield the euro area from a precedent-setting default. Finance ministers awarded 130 billion euros ($173 billion) in aid, engineered the central bank profits transfer and coaxed investor representatives into providing more debt relief in an exchange offer meant to tide Greece past a bond redemption next month. Bondholders response to the swap, Greeces tolerance of more austerity and a gantlet of parliamentary approvals in northern European countries gripped by an anti-bailout mindset loom as risks to the latest salvage operation. Everybody understood that this was the moment of truth, Belgian Finance Minister Steven Vanackere told reporters early today after 13 1/2 hours of talks in Brussels. The assistance brings to at least 386 billion euros the sums spent or committed to save Greece, Ireland and Portugal from bankruptcy, and to insulate Europe from a ruinous financial cascade that might endanger the 13-year-old monetary union. Euro leaders point to declining bond yields in Italy and Spain as evidence that investors are less fearful that the turmoil originating in Greece, representing 2.4 percent of the continental economy, will spill across borders. Spending Cuts The accord lifted the 17-nation euro. It rose as high as $1.3293 at 5:30 a.m. Brussels time from an intraday peak of $1.3277 yesterday. Greece upheld part of its side of the bargain by spelling out 325 million euros in additional spending cuts, the latest of the unpopular measures that have provoked street protests in Athens. http://www.bloomberg.com/news/2012-02-21.... 2012-02-21 00:18:38 Permalink
Gamma Posts: 5592 Incept: 2008-01-20 Northern CA	Heh. Bubble in party hats everywhere. ---------- This stuff we're going through, this is nothing compared to the Middle Ages. They told me if I voted for John McCain, an idiot would be a heartbeat away from the presidency. Sure enough... 2012-02-21 00:31:37 Permalink
Asimov Posts: 104066 Incept: 2007-08-26 East Tennessee Eastern Time	Quote: The assistance brings to at least 386 billion euros the sums spent or committed to save Greece, Ireland and Portugal from bankruptcy Quote: Greece upheld part of its side of the bargain by spelling out 325 million euros in additional spending cuts, the latest of the unpopular measures that have provoked street protests in Athens. Math. Do it. ---------- It's justifiably immoral to deal morally with an immoral entity. If you trade based on what other people say, you will lose money. Especially what I say. I won't be held responsible. Festina lente. 2012-02-21 01:01:53 Permalink
Marvinmartian Posts: 754 Incept: 2011-03-16 Pasadena, CA	Hstella wrote.. Marvin, could you please explain to me why the cds will be triggered with this iteration? What I think is going on is that funding tranches up until now had an increasing percentage of the funds going to French/German banks that owned the Greek bonds, and a decreasing percentage to Greece itself. 19% to Greece in the last funding tranche. There is simply too much debt to be supported by this bailout mechanism. Why this next one is different: the private bondholders wont get paid off in Euros, but will receive new debt as a payment-in-kind. The present value of the debt results in the haircut. Also, whats different this time is that debt held by the ECB doesn't receive the haircut. 2012-02-21 01:35:34 Permalink
Asimov Posts: 104066 Incept: 2007-08-26 East Tennessee Eastern Time	The ECB has been all in since the get-go. When they finally have to show their cards.... Well, keep in mind that in late 09 the ECB publicly stated that they were not aware of what the value of the collateral they had was. They have, since then, stated at least twice and I think three different times that they were lowering their standards on collateral. Several iterations ago, they were taking any piece of paper with dog **** smeared on it as collateral. I honestly don't think they have even bothered to care AT ALL for years. ---------- It's justifiably immoral to deal morally with an immoral entity. If you trade based on what other people say, you will lose money. Especially what I say. I won't be held responsible. Festina lente. 2012-02-21 01:44:56 Permalink
Throxxofvron Posts: 10339 Incept: 2009-02-17 Hyper-Speculative Psycho-Facsistic Parabolic Blow-Off	What must be understood is that there are now effectively TWO Greek Governments: the Democratic/Socialist Government of the Domestic Citizenry and the Technocratic/Bureaucratic Government of the Foreign Creditors. There is a lesson here: barring a sustainable export economy or colonialist expropriations; unbridled Democratic Socialism will inevitably progress until such a point where the demands of the Citizenry for subsidization results in the wholesale pawning of both the Property and Authority of the Sovereign Nation itself. There are TWO 'Greek' Governments which now exist simultaneously; the failed Greek Democracy and the Creditor imposed Troika Tyranny. The former is a failed domestic Democratic/Socialist Experiment. The latter is the externally imposed construct for expropriation of the Sovereign Property and Authority as payment for the loans squandered on unsustainable Social Programs. The Troika is designed to privatize/expropriate Greek assets and to skim tax collections -perpetually. The facade of Greek democratic autonomy may be preserved; but, it will be not much more than that -a facade. ---------- DIONYSUS: " Thou hast no knowledge of the life thou art leading; thy very existence is now a mystery to thee. " -from 'The Bacchantes' By Euripides During times of universal deceit, telling the truth becomes a revolutionary act. -George Orwell 2012-02-21 05:12:05 Permalink
Dji Posts: 1245 Incept: 2009-04-21 Ponzi world 3rd rock from the sun	Where is the kick the 55 gallon drum full of dog **** smiley code at? ---------- Don't be a bag holder-Me What goes up Must come Down- Alan Parsons Project 2012-02-21 06:44:13 Permalink
Asimov Posts: 104066 Incept: 2007-08-26 East Tennessee Eastern Time	The ECB is holding it as collateral against a few billion in spanish bonds. ---------- It's justifiably immoral to deal morally with an immoral entity. If you trade based on what other people say, you will lose money. Especially what I say. I won't be held responsible. Festina lente. 2012-02-21 06:45:35 Permalink
Bobby Posts: 2997 Incept: 2008-01-19 vermont	IF you live in Greece, I think the wise play is to get out of the banks. Move to cash. I would hold it in dollars, not Euros. If this does not spread, short term, there is a good chance the euro will climb up. After the shock. But, I would not be in Euros, when this blows. Things could get out of hand, very fast. bob ---------- "It was the money.You Americans, you believe money is power.""Belief, is power." 2012-02-21 06:51:16 Permalink
Jubber Posts: 14174 Incept: 2007-07-05 UK	So the ECB walks away without taking ANY losses on its holding, how the **** is that work? ---------- The problem with socialism is that, sooner or later, you run out of other peoples money. Thatcher 2012-02-21 06:53:52 Permalink

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Hstella wrote..