Monday, September 26, 2011

Oh! this could get ugly!

Because math has this tendency to work, the question of whether or not the Greeks will default on a LOT of loans is not a matter of if but when.  Loans that cannot be repaid will not be repaid, etc.

So now the mad scramble starts over who is going to be stuck with the losses.  Of course, the first target is the Greek taxpayer, and then the German taxpayers, and the Finns, etc.  The banks literally cannot afford to take the haircut a write down of the debt would entail—they gave away their rainy-day fund in executive bonuses so a lot has disappeared into overpriced Manhattan condos, hookers, and blow.  So if Greece defaults, they are all legally bankrupt.  So they are mounting a campaign the reassure the rest of us that if they get into trouble again, we should be happy to bail them out once more.

Overheard a network money-honey explain that the job ahead was to convince the German voter to do the responsible thing and back the bailouts necessary to save the Euro.  I had my back to the teevee because I was cooking so I didn't get the reporter's name, but I am quite certain that a great deal of money will be spent (both legally and illegally) arms will be twisted, and a parade of whore economists will conjure up tales for why the average German should be given the bag with all the losses, so she was obviously spouting the current bankster line.

Isn't this just precious—the IMF ordering around their bosses.
EU given six weeks to protect itself against 'inevitable Greek default'
IMF tells eurozone EFSF may need to be boosted five-fold to £1.7tn to convince markets that default could be contained

Heather Stewart and Larry Elliott in Washington, Saturday 24 September 2011 23.54 BST

European Union governments will spend the next six weeks building a financial firewall to protect their fragile banking systems against what is now seen as an inevitable Greek default. 
G20 sources said that up to 50% was likely to be wiped from the face value of Greece's €350bn debt – but not until Europe had put into place a war chest to prevent the contagion spreading. 
More money will be disbursed by the International Monetary Fund and the EU next month to keep the Greek government afloat, but this is seen as a short-term fix while Europe's leaders beef up the eurozone bailout fund, the European Financial Stability Facility. 
Europe came under ferocious pressure at this weekend's IMF meeting in Washington to contain the spiralling crisis, which is blamed for dragging the global economy to the brink of a double-dip recession. The IMF is reportedly willing to continue bailing out Greece in the short-term, provided that Europe uses the time to tackle the issue of debt once and for all. The Washington-based lender believes the 18-month delay since Greece was first bailed out last spring has exacerbated the crisis. 
Tim Geithner, the US treasury secretary, said: "The threat of cascading default, bank runs and catastrophic risk must be taken off the table, otherwise it will undermine all other efforts, both within Europe and globally. 
"Decisions as to how to conclusively address the region's problems cannot wait until the crisis gets more severe." 
Officials attending this weekend's meetings suggested that the EFSF may have to be boosted to up to £1.7 trillion, almost five times its current size, to convince markets that it could contain the destabilising impact of a Greek default. Instead of European governments being forced to pour in cash up front, Geithner and others are calling for the EFSF to be allowed to underpin the operations of the ECB, by guaranteeing to bear part of any losses it is forced to take on sovereign bonds. That could massively boost the ECB's buying power and help it to damp down the crisis in the event of a Greek default. more 
Oh the Guardian, it tries to be so liberal but when push comes to shove, the organization is totally wedded to the perspectives of the investing classes—you know, the E-trade baby.
Warning of a stock market rout unless a eurozone rescue package is found
Obama urges France and Germany to move quickly to find a solution to the eurozone crisis, while UK chancellor George Osborne claims Britain is 'ahead of the curve' 
Phillip Inman in London and Larry Elliott in Washington, Friday 23 September 2011

EU leaders were under renewed pressure today to agree immediate steps towards a full-scale rescue of ailing eurozone economies or risk a stock market rout when exchanges open on Monday. 
Fears that months of debate over how to resolve the Greek debt crisis had brought the world economy to another "Lehman's moment" led several prominent analysts to warn that the situation could spark a run on bank stocks next week. 
President Obama and the US treasury secretary, Tim Geithner, welcomed a commitment by the European Central Bank to step up its efforts to boost growth, which could mean a cut in interest rates at its next meeting in October, but pressed France and Germany to move quickly with a rescue package to prevent further turmoil. 
George Osborne warned that the leaders of the eurozone had six weeks to end their political wrangling and resolve the continent's crippling debt crisis. 
Eric Wand, a gilts strategist at Lloyds Corporate Markets, said: "If we come in on Monday with nothing on the table, then we'll be back to the races." 
Wand warned that loans from the ECB would be more sticking plaster and unlikely to satisfy investors. "[They] are hoping for a co-ordinated policy response. If we get that, then risk assets could rally, but for how long? More liquidity doesn't really cut the mustard," he said. more 
And a reminder of why it is in almost everyone' best interests for Greece to default.
Former Icelandic Banker Explains Why Greece Should Let Its Banks Default
Julia La Roche | Sep. 22, 2011

Greece and other euro zone nations involved in the on going debt crisis should consider taking similar steps to how Iceland handled its crisis in 2008, a former Icelandic investment banker told Business Insider.

The banker said Greece should just go ahead and let its banks default just like Iceland did.

"The biggest problem is everyone thinks we can add to government liability and roll it forward."

He doesn't think adding to government liability will work though.

"If you delay the pain, you dampen growth. It's like a band aid, just take it off."

He acknowledged that it won't be an easy task.

"It will be a painful five to ten years, but they will only extend the problems by not taking the pain."

He pointed to Iceland as an example and said the country has been able to move forward and begin to rebuild its economy.

In 2008, Iceland, which has a population of about 320,000, became embroiled in a massive financial crisis.

What happened was Icelandic banks, which owed more than six times the country's GDP in debt, became insolvent when the world's credit markets dried up.

As a result, the banks couldn't pay their loans back.

Unlike the U.S. which used taxpayer money for bank bailouts, Iceland's government chose to let the banks default.

"'Too big too fail' didn't apply in Iceland," the banker said. "It was 'too big to be rescued.'"

Iceland's banks ended up defaulting on a whopping $85 billion. more

No comments:

Post a Comment