Greeks Buy Time for Insolvent Bankers and Delusional Politicians (John Browne)

Euro Pacific Capital
By: John Browne
Tuesday, July 5, 2011

Last week, the Greek parliament voted by a narrow margin to pass an economically crippling austerity plan of some $40 billion in return for some $159 billon of fresh liquidity injections. Although many hailed the event as a needed first step on a long road to recovery, I believe the austerity program will make a bad situation worse. It is a flawed solution that stems from a false premise: that Greece should continue to be part of the euro zone, and continue to use the euro as its currency.

To return to national economic viability Greece must abandon its use of the euro currency, which has become a financial straight jacket. Nevertheless, Greek politicians may have agreed secretly to accept the austerity in name only, in return for a liquidity bailout that will buy time for European unity to solidify. Once political unity is restored, we should expect more massive financial transfers from northern countries, present day Germany and Britain, to the subsidized southern regions.

As its price to maintain the status quo, central bank lenders, including the IMF and ECB, are demanding that Greece sell off some $72 billion of its national assets. The likely buyers will be international companies based in the EU, U.S. and possibly even China. Such a fire sale can't restore the Greek economy, but it gives the appearance that the Greeks are paying something for their loans, and it provides cover to northern European politicians who are feeling increasing frustration from voters who have been continually asked to foot the bill for southern European profligacy.

In contrast, Greece could have decided instead to abandon the euro and devalue a new Greek currency unilaterally to pay its debts. This is the typical remedy for marginal economies that have gotten into debt quicksand. Most certainly, devaluation would reduce Greece's standard of living by slashing the purchasing power of Greek citizens. But in recompense it would boost exports and improve Greece's balance of payments. The Greeks could then begin the hard work of restoring their economy while maintaining ownership of their national assets.

However, if Greece was to abandon the euro, the shaken confidence could lead to a euro collapse, bringing to an end the idealistic dreams of a unified Europe. Politicians are desperate to avoid this no matter what it costs their increasingly subjugated peoples.

In addition, a Greek debt default would trigger massive losses on the books of EU banks, many of which had been 'persuaded' by their governments to invest in Greek debt. Also, major U.S. banks have profited hugely by selling Credit Default Swaps (CDSs) to insure these loans. Indeed, they have insured some $32.7bn of Greek debt alone. Furthermore, U.S. banks have invested directly in European sovereign debt. In other words, the financial pressure to keep Greece from defaulting is enormous.

The euro is the world's second largest reserve currency. Its dissolution would cause huge shockwaves in a currency system that already is causing some investors to hedge in precious metals. A collapse of the euro could likely send gold, silver and most food commodities skywards in price. As a result, politicians and the bankers share a common interest in saving Greece from debt default and so salvaging the euro, regardless of the effect on the Greek people.

Greece's vote to accept austerity has yet to be enacted in specific cuts and taxes, but when they do, expect public resistance that will dwarf what we have seen thus far. At that point we can expect this debate to be revisited. I believe that when the pressure becomes too intense, Greece may in fact return to the Drachma.

I have consistently argued in these columns that a sovereign debt crisis would develop into a possible currency collapse. The beginnings of this endgame can be seen today on the streets of Athens.

Moody's slashes Greece to 'Ba1' from 'A3' (a.k.a. JUNK)

By Sue Chang SAN FRANCISCO (MarketWatch) -- Moody's Investors Service on Monday downgraded Greece's government bond ratings by four notches to junk status of Ba1 from A3, reflecting its view of the country's medium-term credit fundamentals. "The Ba1 rating reflects our analysis of the balance of the strengths and risks associated with the Eurozone/IMF support package. The package effectively eliminates any near-term risk of a liquidity-driven default and encourages the implementation of a credible, feasible, and incentive-compatible set of structural reforms, which have a high likelihood of stabilizing debt service requirements at manageable levels," said Sarah Carlson, Moody's senior analyst. "Nevertheless, the macroeconomic and implementation risks associated with the program are substantial and more consistent with a Ba1 rating," she added. The outlook on all ratings is stable.

Japan PM warns of Greece-like debt crisis (Hey Geithner and Bernanke...are you listening?)

By MARI YAMAGUCHI, Associated Press Writer Mari Yamaguchi, Associated Press Writer – Fri Jun 11, 6:44 am ET

TOKYO – Japan could face a financial mess like the one that has crippled Greece if it does not deal urgently with its swelling national debt, the new prime minister warned Friday.

While Japan is on firmer financial footing than Greece because most of its debt is held domestically, Prime Minister Naoto Kan's blunt talk appeared designed to push forward his agenda, which may involve raising taxes.

Speaking in his first address to Parliament after taking office Tuesday, Kan said Japan cannot continue to let government debt swell while state finances are under pressure from an aging and declining population.

"It is difficult to sustain a policy that relies too heavily on issuing debt. As we have seen with the financial confusion in the European community stemming from Greece, our finances could collapse if trust in national bonds is lost and growing national debt is left alone," he said.

Japan, the world's second-largest economy, has the largest public debt among industrialized nations at 218.6 percent of its gross domestic product in 2009, according to the International Monetary Fund.

Kan, who became Japan's sixth prime minister in four years after a short stint as finance minister, promised his government would work closely with the Bank of Japan to avoid an increase in deflation and would focus on developing a "strong and comprehensive" policy.

Kan has said he will also consider raising taxes, an issue he said previous governments had been too timid to face. A social progressive and a fiscal hawk, Kan said he would announce further details of his economic growth plan later this month.
Link to complete article

Mr. Geithner and Mr. Bernanke, Japan's Prime Minister

is on the phone...

Ron Paul on Debt, Goldman Sachs, Greece and Gold

The type of problem that has hit Greece will eventually hit the US, Rep. Ron Paul, R-Texas, told CNBC. Ron Paul has been anticipating problems since 1971. Politically, it is impossible to cut spending.

Federal Reserve has the "bizarre" power to create money out of thin air and bailout their friends while letting others fail. Grandpa: one has to ask themselves how so many elected "representatives" refuse to see the big picture and choose to ignore the impact their selfish and ignorant actions have on our grandchildren!

Nouriel Roubini: Greece is just the tip of the iceberg. Odds that anyone in congress will listen to this message...1 in 10 trillion

Nouriel Roubini : In my view what's happening in Greece is just the tip of an iceberg , ...we socialized these private losses , now we have large budget deficits in Europe in Japan in the United States the bond market vigilantes are waking up in Greece in Portugal in Spain at some point they are going to wake up in UK in Japan in the United States we are running a trillion and half deficit it is obviously over time not sustainable ....

America's debt is unsustainable says Nouriel Roubini , for now the FED can keep interest rates at Zero and the rest of the world is financing us but this situation cannot last forever

European Union goes Full Monty...would you like the trillion in small bills? U.S. Equity futures setting up for the short squeeze of the century

The European Union has surpassed Bernanke, Paulson and Geithner. They have implemented the Full Monty!

Bloomberg:
By James G. Neuger and Meera Louis
May 10 (Bloomberg) -- European policy makers unveiled an unprecedented loan package worth nearly $1 trillion and a program of securities purchases as they spearheaded a drive to stop a sovereign-debt crisis that threatened to shatter confidence in the euro. Jolted into action by last week’s slide in the currency to a 14-month low and soaring bond yields in Portugal and Spain, governments of the 16 euro nations agreed to make loans of as much as 750 billion euros ($962 billion) available to countries under attack from speculators.

The ECB will also embark on “very significant operations,” European Union Economic and Monetary Commissioner Olli Rehn told reporters in Brussels after the 14-hour meeting. “The ECB has taken a decision to intervene in the secondary markets of government securities.”

Under pressure from the U.S. and Asia to stabilize markets, the European governments gambled that the show of financial force would prevent a sovereign-debt crisis and muffle speculation that the 11-year-old euro might break apart.

Raf Casert and Elena Becatoros, Associated Press Writer, On Sunday May 9, 2010, 10:10 pm
BRUSSELS (AP) -- The European Union and the International Monetary Fund pledged a massive nearly $1 trillion defense package for the embattled euro Monday, hoping to finally turn back relentless attacks on the eurozone's weakest members and allow the continent to resume its hesitant economic recovery.

Under the three-year aid plan, the EU Commission will make euro60 billion ($75 billion) available while countries from the 16-nation eurozone would promise bilateral backing for euro440 billion ($570 billion). The IMF would contribute an additional sum of at least half of the EU's total contribution, or euro250 billion, Spanish Finance Minister Elena Salgado said.

"We shall defend the euro whatever it takes," EU Commissioner Olli Rehn said after an 11 hour-meeting of EU finance ministers. The meeting capped a hectic week of chaotic sparring between panicked European governments and aggressive markets.
Link to complete AP Article

Standard and Poor's 500 futures at 9:38 pm CDT UP 28+. Not only are the robots back, they are setting up Monday for the short squeeze of the century. Naturally, a violent move up is sanctioned by the SEC and congress especially with mid-term elections less than 6 months away. Notice how no one blames a "fat finger" trader for a rocket launch...

Let's not forget the other important headlines in the United States, because we are the United States and this is important stuff to the Housewives of NJ and the American Idol Country. Who really wants to be bothered with bailouts and printing money, let's read about the really important stuff!!!

Iron Man 2' takes in hefty $133.6 million on opening weekend

'The Amazing Race' Recap

Facebook glitch a nightmare for users

Neck injury forces Tiger Woods to withdraw during round

Kim Kardashian Sticks Up For ‘Mom Jeans’

'Real Housewives' Star Bethenny Frankel Gives Birth

'Iron Man 2' rockets to No. 1

This is what America cares about...that international

finance stuff is simply too confusing...

European Union follows in Bernanke and Geithner footsteps: $500 BILLION Euro Bailout Package

By Roddy Thomson (AFP) – 3 hours ago
BRUSSELS — Germany urged crisis-hit euro partners to back an unprecedented 500-billion-euro emergency bailout package on Sunday, with France in "complete agreement" hours before Asia-Pacific markets open.

The dramatic bid to raise a European financial war-chest followed urgent telephone calls between US President Barack Obama, German Chancellor Angela Merkel and French President Nicolas Sarkozy, as Europe sought to reassure the world about the euro before trading resumed on Asian markets.

The eye-watering 500-billion euro proposal emerged after Merkel lost her coalition's majority in the upper German house, as angry voters punished Berlin for a U-turn in a 110-billion-euro (145-billion-dollar) Greek bailout dubbed the "fattest cheque in history" by the tabloid Bild.

Desperate to rebuild confidence on markets before chaos already engulfing Portugal and Spain spreads even further, Berlin proposed that euro countries as a whole call in the IMF, a European Union diplomatic source said.

The money, a mixture of "bilateral loans, loan guarantees and credit lines," the source told AFP, would be made available to threatened members of the 16-nation eurozone only.

It would be made up of 440 billion euros, if necessary, from eurozone countries and the International Monetary Fund, on top of 60 billion euros of loan funds from the European Commission, the executive for the EU's 27 member states.

If the plan were to be agreed by EU finance ministers, locked in late-night talks in Brussels, the facility would be unprecedented in public finance history, dwarfing the Greek bailout only ratified by the IMF earlier Sunday.

Sarkozy's office said a deal with Berlin had been struck on measures to "resolve the financial crisis," after shares tumbled across the globe last week.

Ministers had been tasked with heading off predatory threats to government finances, commercial banks and wider economic recovery.

The talks were marked by drama when Germany's Wolfgang Schaeuble was taken to hospital after suffering an allergic reaction to new medication -- and by dispute, when a British government in its final hours in power set tough conditions.

"We will do whatever is necessary," Spanish Finance Minister Elena Salgado, chairing the EU crisis talks, had insisted beforehand, with Anders Borg of non-euro Sweden saying that "we cannot afford disappointment with the markets."
Link to complete article

The U.S. Equity Market embraces money printing and debt as the Standard and Poors 500 futures are up 21+ as of 5:10 pm CDT. Ben Bernanke has offered to lend out his money printing machine with no conditions attached.

It is shaping up to be yet another Sx Flags Monday. The robots are back and as long as the market goes up, one can be assured the SEC and congress will soon forget about May 6, 2010.

Welcome to the NYSE and the NASDAQ

 

Dylan Ratigan: could the U.S. be the next Greece?

Nothing currently going on in congress does anything to break up to big to fail. 6 largest banks represent 63% of this country's GDP.

Do we want to fix the broken system? Has the Federal Reserve become Lehman Brothers given how they are valuing assets?

Visit msnbc.com for breaking news, world news, and news about the economy

Greece shows their appreciation of the IMF and the U.S. for bailout funds

The citizens of Greece gathered for a day of appreciation to the IMF for the 3 year $147 billion bailout and to show their support and affection to the United States for raising their commitment to the IMF from a paltry $10 billion to $105 billion. Of course no one in the United States has any clue how the upped commitment from the U.S. will be paid for however grandpa has all the confidence in Bernanke and Geithner....NOT!

Europe follows in the footsteps of Bernanke, Geithner and Hank Paulson and Bails out Greece

The European leadership has taken a page from the Ben Bernanke, Geithner and Hank Paulson playbook on bailouts. Moral hazard has officially gone global let alone the debt burden placed on grandchildrens' shoulders around the planet!! 

By KAREN JOHNSON And BRADLEY DAVIS
Wall Street Journal
An unprecedented €110 billion ($146.45 billion) aid package for debt-laden Greece should give the euro a boost this week, but any relief rally is likely to be short-lived amid concerns that other fiscally strapped euro-zone members will also need support.

The positive news from the euro zone could also be overshadowed by measures announced by China to tighten bank-lending standards to prevent its economy from overheating. That could weigh on growth-sensitive currencies, such as the Australian and Canadian dollars, which have benefited from the strength of the Chinese economy. Investors could also be rattled by the discovery of a car bomb in Manhattan's Times Square on Saturday and head for the safety of the greenback and U.S. government debt.

Still, when New York traders arrive at their desks Monday—many markets, including the U.K., are closed Monday—their focus is likely to be on the aid agreement announced Sunday by the euro zone, the International Monetary Fund and Greece. The plan requires the euro zone to put up €80 billion and the IMF €30 billion. National parliaments are expected to sign off on the deal swiftly and euro-zone leaders will validate it Friday, allowing Greece to access the funds before a mid-May debt payment of €8.5 billion is due. In return for the aid, Greece must implement tough measures to cut its budget deficit.
Link to complete article

Likely Response by quant fund algorithmic gamers

trading the equity futures overnight 

Actual response in Greece

Moody's Downgrades Greek Banks...kind of moody if you ask me

LONDON (MarketWatch) -- Ratings agency Moody's Investors Service on Friday downgraded the bank financial strength ratings and the deposit and debt ratings of nine Greek banks. The move reflects "their weakening stand-alone financial strength and the anticipated additional pressures stemming from the country's challenged economic prospects," the agency said. Moody's said the deposit and debt ratings will remain on review for possible downgrade, which will be completed when the agency concludes its ongoing review of Greece's sovereign ratings. The move affects National Bank of Greece, EFG Eurobank Ergasias, Agricultural Bank of Greece, General Bank of Greece, Marfin Egnatia Bank and Attica Bank.

Standard and Poor's just realized Greece is having issues and rates Greece Debt as Junk

We have updated our assessment of the political, economic, and budgetary
challenges that the Greek government faces in its efforts to place
Greece's public debt burden onto a sustained downward trajectory.

We are lowering our ratings on Greece to 'BB+/B' from 'BBB+/A-2' and
assigning a negative outlook.

The negative outlook reflects the possibility of a further downgrade if
the Greek government's ability to implement its fiscal and structural
reform program materially weakens in our view, undermined by domestic
political opposition at home or by even weaker economic conditions than
we currently assume.

MADRID (Standard & Poor's) April 27, 2010--Standard & Poor's Ratings Services said today that it has lowered its long- and short-term sovereign credit ratings on the Hellenic Republic (Greece) to 'BB+' and 'B', respectively, from 'BBB+' and 'A-2'. The outlook is negative. At the same time, we assigned a recovery rating of '4' to Greece's debt issues, indicating our expectation of "average" (30%-50%) recovery for debtholders in the event of a debt restructuring or payment default. The 'AAA' transfer and convertibility assessment is unchanged.

"The downgrade results from our updated assessment of the political, economic, and budgetary challenges that the Greek government faces in its efforts to put the public debt burden onto a sustained downward trajectory," said Standard & Poor's credit analyst Marko Mrsnik.

Link to Press Release

The general meaning of our credit rating opinions is summarized below.
‘AAA’—Extremely strong capacity to meet financial commitments. Highest Rating.

‘AA’—Very strong capacity to meet financial commitments.

‘A’—Strong capacity to meet financial commitments, but somewhat susceptible to adverse economic conditions and changes in circumstances.

‘BBB’—Adequate capacity to meet financial commitments, but more subject to adverse economic conditions.

‘BBB-‘—Considered lowest investment grade by market participants.

‘BB+’—Considered highest speculative grade by market participants.

‘BB’—Less vulnerable in the near-term but faces major ongoing uncertainties to adverse business, financial and economic conditions.

‘B’—More vulnerable to adverse business, financial and economic conditions but currently has the capacity to meet financial commitments.

‘CCC’—Currently vulnerable and dependent on favorable business, financial and economic conditions to meet financial commitments.

‘CC’—Currently highly vulnerable.

‘C’—Currently highly vulnerable obligations and other defined circumstances.

‘D’—Payment default on financial commitments.

Note: Ratings from ‘AA’ to ‘CCC’ may be modified by the