“We’re about this far up the beanstalk”

There are signs that Germany, the IMF and Washington retain their doubts about Greek ‘salvation’

Seemingly confident that the worst is behind him, Evangelo Venizelos strode into a PASOK Party conference this morning. A pensioner on crutches hurled a full yoghurt pot at the obese Finance Minister just before he got to the podium. Perhaps this was the old man’s way of trying to add a little culture to the occasion: either way, it was a timely reminder of the deep unpopularity of the austerity measures this shifty and widely hated man has driven through – by fair means and foul. 

But as he knows perfectly well inside his capacious and intelligent head, Venizelos has many an obstacle to overcome before standing any chance of becoming Prime Minister at the elections scheduled for late April. Not least of these is the fact that Pasok badly trails New Democracy in the opinion polls. But bigger still is what observers of the Greek predicament may yet learn…if the MSM gets off its backside and starts reporting reality, as opposed to fantasies put out by the Troikanauts and the Venizealots.

In yet another coup, the Tyler Durden column at Zero Hedge, today led with a piece from bestselling author Mark J Grant, pointing out all the other payments effectively triggered by the ISDA decision….and how, once the ratings agencies call default (as at least two of them assuredly will) these will explode, multiply and then get exponentially bigger and bigger via the madness of collateral agreements and default swaps – a process dubbed ‘acceleration’. So far, just one ropey bank – Austria’s KA Finanz – is known to be facing a $1.3bn payout that doesn’t seem to be there in its accounts, as such. But Grant argues that this is the tip of the iceberg…and chiefly, it’s the good ship Hellenic that’s heading straight for it:

‘….there are bank bonds, Hellenic Railway bonds, Urban Transportation bonds et al that are guaranteed by Greece. You will also note that there are bonds tied to Inflation, Floating Rate Notes, Asset-Backed securities and a whole mélange of other structured products with a Greek sovereign guarantee. What we all thought was fact [bailout] is now clearly fiction, and default will now bring “Acceleration” one could reasonably bet in all kinds of these securitizations and in all kinds of currencies.  This could come from the ratings agencies placing Greece in “Default” or it could come from the CDS contracts being triggered depending upon each indenture and you will also note that a great many of these off balance sheet securitizations are governed by English Law and not Greek Law. You may also wish to consider the fallout to the banking system as the lead managers of all of these deals could find themselves behind the eight ball as various clauses trigger and as the holders of these securitizations line up at the judicial bench….’

Sadly, he’s right. Wall Street, the White House, the Berlin FinMin and Wolfgang Strangelove know he’s right. But ordinary Europeans and Americans don’t, and that’s the problem. Under the calling of a default caused by not paying the full amount to the Greek bondholders and applying coercion, these additional liabilities become immediately due and payable at their principal amount together with accrued interest. What they all have in common is a frightening number of noughts following the bottom line numbers.

The funny-money is about to start seeping into the real money system.

Starting tomorrow, The Slog is will be running a series of pieces detailing the crazy assumptions, insolvencies, derivative obligations and – above all – endemic levels of corruption in the EU generally, and Greece in particular. It will feature leaked documents showing how deeply ingrained graft is in the privileged Greek elite; how German companies have cheated the Greeks and fed the graft by paying huge bribes and overcharging to an obscene degree; and how Evangelo Venizelos himself – both now and in the past – stands accused of cheating his people and protecting himself and the equally greedy members of his Establishment clique.

But that’s then, and this is now. In case you hadn’t noticed the Troika approving the Greek psi audit, neither have I. Most titles and sites are gaily contining to talk of the bailout as a done deal, but it is anything but. In the weekend absence of normal snouts in Brussels, I rang the ECB and got a rambling answer which achieved its objective of telling me nothing. “We have no reason to”, “There is no indication we know of that” and so forth – but no sign whatsoever “Yes we checked the numbers and they’re fine”. I suppose it would be logical to ask whether they’d tell us even if they did find some holes in there, but it would be nice to have a confirmation with which to hang those responsible later.

The ECB meanwhile has other sausages on its plate. Berlin has restarted its campaign of “assuring EU citizens” that Mario Draghi’s slush-money campaign for eurozone banks is now at an end. It’s a shrewd approach this one, forcing Draghi to either keep shtum, or have to say “Oh no it isn’t”. That would immediately start inflationary alarm bells ringing. But deep in his personal silo two miles beneath the German Finance Ministry, Wolfgang Schauble scoffs at such talk. He knows perfectly well that traditional printing-derived inflation like this, while irksome, is but a minor bee-sting compared to the cobra-bite of funny-money inflation heading our way. Yes, the Bankfurt Maulwurf has been on the line again.

“I think you could now say that Herr Schauble is somewhat depressed,” he told me this afternoon, “but continuing to pin his hopes on some kind of cleverly created and then formally controlled Greek default. He certainly does not wish anything like 130 billion euros to go to either Athens or the creditors. Meanwhile, we in the banking community have fallen back on prayer”.

To be fair to this bloke, he does have a sense of irony. And he steadfastly refuses to acknowledge the existence of any international attempt to push Greece into default. His agenda is a simple one: he thinks Merkel has delusions of grandeur that could easily wind up destroying the Bundesrepublik, and he’s very keen for anything that supports his view getting out into the open. He still, for example, refers to fiscal union as “a gun at Germany’s head”. But he never acknowledges any Washington influence. That would be bad form. What I still don’t have is any kind of audit (or even steer) on how representative he is of Bankfurt opinion. (If any German readers do, the discreet place for such information is, as always,

Over in America itself, Tim Geithner continues to be yes and no about the bond-swap psi ‘success’. “Over the last few months, the Europeans have done a much better job getting their arms around this and getting people more confidence around the world that they are going to contain the risk of crisis,” said the US Fed Treasurer, “but it is going to be a really difficult long road for them.” Especially for the Greeks eh, Tim?

Christine Lagarde at the IMF was equally circumspect. Note again here that not only has she drastically cut the IMF’s contribution to Greek bailout – to just €28 bn – she is being very careful not to commit:

“Today I have consulted with the IMF’s executive board and on that basis, as discussed with the Greek government, I intend to recommend a €28bn arrangement … to support Greece’s ambitious economic programme over the next four years,” she said.

I don’t think she has the slightest intention of ever giving that money to Athens. Once the other sovereign obligations start to surface, and the Greeks start to backslide on austerity, and the strikes get worse, and the economic data from Greece become more dire still, she will pull the plug…as indeed will the Troika as a whole. I don’t have an update for you tonight on whether those keen on ‘amputation now’ are in the ascendancy or not. It’s the weekend: most people have a life. It certainly would be nice to write articles about things other than the criminal rape of Greece (and its utter pointlessness) but there is more to play out on this yet.

Related: Did Venizelos employ bribery to get the psi level up to 85.8%?


  1. Monstrous! How on earth did anyone in his right mind believe this could be hidden, or more to the point, how is it going to be explained away. No wonder the Troika were keeping a safe distance from Evangelo Venizelos’ counting house.


  2. 12 days until the next D-Day. There’s a lot of time left for the whole thing to eat itself way before then.

    A day of reading about this (ZH has been amazingly on the ball with it) leaves me thinking that we are no longer on the edge, we’ve already fallen and the ground is coming up to meet us.

    The Greek default plan is still set, I just think it will implode long before the 23rd and leave the EU to bleed out by the end of spring.

    Cataclysm and revolution are all that can change the system now. Hard as it will be, it’s now entirely needed to create an opportunity to start over. Duck and cover, hopefully we’ll all see each other on the far side (minus out illustrious “leaders” of course!)


  3. Thank you, Mr Ward, for your first-rate (and refreshingly sarcastic) coverage of these complex issues. I wouldn’t recommend anyone to get their news from just one source, but regarding the Greek crisis, The Slog is now always my first stop (of several) when trying to make sense of it all.

    So do you think we’re still on track for March 23, or will it all blow up even before then?


  4. Surely if the Troika knew about these off-balance sheet securitisations worth another whopping load of €billions that become payable immediately after the CAC was called, they should not have handed over €35 billion of the 2nd bailout the other day. Or has placeman L-Papademos gone native and hidden them down his pants?


  5. A fiver (or a billion Euros – take your pick) says no-one thought to check the small-print in the off-balance sheet bond contracts…..


  6. After the nonsense is over the real issue remains. 10 times global GDP outstanding in the debt market. Fair play to JW, he was first to spot/report it as far as I know. Greece is a storm in a teacup compared to what may come next. There’s not enough money in existence to pay the debts. It’s just not ‘effing possible. How can someone lend more money than exists? Anyone claiming to have done so needs a pitchfork in the appropriate place.
    I once worked as a strawberry picker in the Chedder Valley and I don’t think you could sell derivatives to those farmers. They had amazing bullshit detectors.
    I’m feeling a bit drunk and mildly optimistic/please God let it be true, so I enclose a link of Steven Baker MP ( Conservative) trying to get a bill into the House of Commons to severely alter banking regulations. That’s severly with a capital S.
    He’s barking up the right tree in my tiddled opinon. What he proposes is a knife in the ribs of the current banking system, which incidentally did not descend from heaven but was set up by a bunch of bankers 30 years ago.
    It’s as real as your shadow.


  7. I thought it was common knowledge that GS had advised Greece on how to hide lots of debt in off-balance sheet structures in order that it could appear to meet the criteria for EZ membership? That being the case, how come no-one checked this out before the bailout was conditioned?

    When this one blows, it will make Enron and Allen Stanford look like small beer.


  8. Maybe a wee bit off-topic – or maybe not! These two stories have just been posted on DMN; here the headlines and a resume of the content.

    “Setback for Barroso

    EU wanted to transfer Regulating Europe to the UK

    In an effort to induce David Cameron to sign-up to the Fiscal Pact, at the end of 2011 the EU offered the Briton the post of EU Commissioner for Regulation. But the British remained hard and beat off the attempt at horse-trading. The attempt shows, however, the means that Brussels will employ to push through its centralist interests.”

    Apparently, the idea was that Cathy Ashton was to have swapped her post with Michel Barnier – the Froggie that’s always having a go at the Brits. The idea itself apparently emanated directly from Barrosso. Naturally, all parties are now in strict denial mode that it was ever mooted!

    By Thor & Odin – “Ban the Bomb” Ashton being given responsibility for making money instead of squandering or hiding it. It doesn’t bear thinking about.

    To continue with a further report:

    “The first signs of financial problems

    Renewable energies: the bubble is threatening to burst

    Many banks have built up huge positions with loans to companies in the renewable energies sector. In 2011 the small Bremer Landesbank pumped more than a billion into the sector. Now, the first difficulties are cropping up – and the state-owned KfW must jump in with guarantees.”

    This one is more for Delingpole than the Moonbat – and who knows, maybe Cameroons dad-in-law will soon have to get a proper job! There’s a lot of it, so just selected sentences & sections.

    “About 600,000 German households have had their electricity cut off by energy suppliers in recent months because of their unpaid invoices.”

    I’m sure these people have a lot of sympathy for the plight of the southern Europeans? It’s been damned cold here this winter!
    “The Bremer Landesbank also entered the business on a large scale. It concentrated 29 of its industry professionals in Oldenburg for the promotion of renewable energies. During 2011 they granted over one billion euros in loans for the construction of green electricity facilities. Thus, the Bremer bank can look back on its most successful year in this business. After all, its market share accounts for 15 percent of the nationwide credit given for green electricity facilities. It has become one of the largest funding partners for the energy sector in Germany
    So far so good – then a resume of the risks, followed by:
    “Already the first financing problems for wind farms at sea (offshore) have arisen. Here there are hardly any private building and loan interests, as the costs of building and operating on the rough seas are inescapably non-predictable. Therefore, the governments own KfW bank has had to step in and provide guarantees amounting to five billion euros to secure the plans of the politicians for offshore electrical power as a component of the 35% green target.

    What remains is the technical risk for the operator: for connecting the electricity from the wind farms to the German grid, special and expensive high-voltage lines through the sea are required. For these, however, the network operators, as they declare, have no additional money available. Thus, the expansion of the wind farms at sea has again been postponed. The Federal Network Agency will therefore approve higher network charges, in that the fixed rate of return on network investments is dramatically increased (to 11.5% gross).

    But there are even more unpleasant side effects: the funds loaned for green energy measures reduces the amount of money available for other much-needed loans. Precisely this is what companies and businesses want, who wish to expand, employ new staff or restructure. And: at the same time, the cost of electricity rises in these small and medium enterprises, just as it dies for other domestic households. So once again, the German S&ME is not being re-financed by this renewable energy, instead, a new table has been opened in the financial casino. The ultimate comfort for all critics: In the global financial casino, at the end there is always a bailout for the bank.”

    Perhaps those still holding preconceptions about German efficiency will now reconsider. They are as susceptible to the brewery/p**s-up and brothel/orgy syndrome as the rest of us.


  9. It’s all piffling. All this Greek stuff is piffling. It’s buttons, it’s chump change as the Yanks call it.
    ‘We’ owe more than the entire amount of money that exists. And the definition of ‘we’ is not up to ‘us’.


  10. That’ll be -at least in Stanford’s case- because he WAS small beer and wasn’t TBTF, and that’s the only reason he was taken down -he wasn’t big enough to really rock the apple cart when threatened and had the gall to live mostly off-shore instead of in Dallas or wherever. Give the impression that “something is being done”, when actually nothing is being done except throwing one of the small fry under the bus.


  11. Adding to John’s observations and those of ZeroHedge,two commenters from the Telegraph, this morning, piqued my interest…

    “bond holders have voluntered to reduce the value of their holdings by 53.5% and give Greece more time to repay. However, when you are given the choice of 46.5% or nothing it really is hobson’s choice.
    Of course the reality is that unless the Greek economy starts growing at 2% a year from next year these new bonds are as worthless as the one’s they replace.” (JPV)

    “I read that the new Greek Bonds are already trading at an average of 30 cents! (Wall Street Journal 9Mar12). Wouldn’t this mean that once the creditors (Banks/ECB) receive these new bonds they would have to Mark to Market them and once again incur big losses? ByJune/July, there is going to be another Stress Test for all the banks. How are they going to represents these New Greek bond in their balance sheets? (Miguel Smaudio)

    Other comments are to the effect that we are no longer merely peering into the Abyss or teetering on the edge of it, but are actually in the headlong plunge into it. Monday is going to be an interesting day.


  12. “Starting tomorrow…his Establishment clique.” If you achieve even half of what this paragraph promises, then I think that you may become the single-handed Destroyer of the EU. Quite an achievement. I wish you well, and sincerely hope that you succeed.


  13. Oh dear. I think the whole meaning of money has become abstracted to the nth degree. All the default insurances will become embroiled in legal argument for years to come. Much longer than a rational person would have concluded that the whole lot of them weren’t worth a sardine sandwich. Hope you have a bolt-hole or bunker John.


  14. The bit I don’t get is: If Greece has all these natural resouces at hand why are they not exploiting them to it’s own advantage?
    With so much oil could it not grow it’s economy and pay back its debts?
    And, if this were the case, would that oil have to be sold in Dollars?
    Am I missing something here?


  15. Excellent post John.

    I think your upcoming series should be mandatory reading for MSM.

    PS I wonder if you could go multimedia with this – ie YouTube it. Done right it could get the message across to many more people (millions instead of thousands).


  16. Aplogies can’t find a link so whole pice from Phenicx Capital Research – bit on SOFFIN I have not seen before.

    “The Black Swan NO ONE is Talking About: Germany’s “Plan B”
    While the Second Greek Bailout may or may not be complete (depending on whether we get a credit event as a result of it), Germany can and will walk from the Euro if it needs to. This is the unforeseen black swan everyone is ignoring.

    Obviously, Germany wouldn’t want to do this as it would result in Germany being blamed for the Euro failing. So thus far, “Plan A” for Germany has been to offer bailout funds that are contingent on requirements so unpalatable that Greece or any other PIIG would likely end up preferring to walk rather than submit to them.

    Case in point, before the second Greek Bailout German Finance Minister Wolfgang Schäuble proposed that Greece should postpone its April elections as part of the bailout package.

    In simple terms, Schäuble is concerned that the unpopularity of the austerity measures being imposed on Greece as part of the second bailout package would lead to a “wrong” democratic choice.

    Let that last paragraph sink in for a moment; it’s so outlandish it’s hard to even comprehend. Imagine if a Chinese official suggested the US put off its elections otherwise China would dump US Treasuries en masse and you’ll see what I mean.

    Understand, Schäuble is no idiot. He knows that there is no way Greece would go for this. So his comment can only be seen as an attempt to incite a Greek backlash while also winning political points in Germany.

    Indeed, those who show themselves willing to play hardball with Greece have seen a huge boost in the polls (Merkel recently saw her approval ratings hit their highest levels since her re-election by doing this). Schäuble is obviously taking a page from her playbook here.

    We should also take Schäuble’s statements in the context of Angela Merkel’s recent backing of Nicolas Sarkozy’s re-election campaign in France against hardened socialist François Hollande, who wants to engage in a rampant socialist mission to lower France’s retirement age, cut tax breaks to the wealthy, and break the recent new EU fiscal requirements Germany convinced 17 members of the EU to agree to.

    Current polls show Hollande winning the election if it goes to a second round. The fact that Sarkozy’s re-election campaign just kicked off with an MP from his party announcing that the Nazis never deported homosexuals from France to Germany during the Holocaust (hardly a statement that boosts Sarkozy’s chances of re-election) isn’t helping.

    Put another way, German leaders, particularly Merkel and Schäuble see the writing on the political wall: that both Greece and France are likely going to find themselves with new leadership that is pro-socialism, anti-austerity measures, and most certainly anti-taking orders from Germany.

    Thus, Germany must be aware (as the EU, IMF, and ECB are to some degree) that it is ultimately fighting a losing battle by participating in the bailouts. Indeed, Schäuble has even gone so far as to recently call Greece a “bottomless pit” where money is wasted (having just participated in Greek bailouts that exceed the entirety of Greece’s GDP, he does have a point here).

    Schäuble’s statements have not passed unnoticed by the Greeks. Greek politicians have regularly brought up Germany’s lack of war reparations to Greece post-WWII while the Greek media has begun regularly portraying Schäuble and Angela Merkel as Nazis.

    So while a “deal” may have officially been struck for Greece, there are deep underlying tensions that could bring the EU to a crashing halt at any point.

    Big picture, we must remember that Greece is just the opening act for what’s to come in Europe: Italy and Spain are waiting in the wings to take center stage as soon as the Greece bailout deal is finalized (if this happens… which remains to be seen).

    Having seen how ineffective the whole “hand over fiscal sovereignty in exchange for more, cheaper debt/ bailouts” deals have been for Greece, Spain’s already told the EU to “shove” its budgetary requirements. This kind of political tension will be growing between EU members in the coming months as Ireland, Portugal, Spain and Italy all start showing their hands at the EU poker table.

    Germany is aware of this, as well as the fact that there is no way German voters will go for bailouts of any more of the PIIGS (even if Germany, the IMF, and ECB had the funds to bail out Spain or Italy… which they don’t).
    This is why Germany has decided to play hardball with Greece. It’s also why Germany has put into place a contingency plan that would permit it to leave the Euro if it had to.

    What is Germany’s “Plan B”?
    Leave the Euro but remain in the EU (maybe).

    If you don’t believe me, consider that in the last six months Germany has:
    1. Passed legislation that would permit Germany to leave the Euro but remain a part of the EU
    2. Reinstated its Special Financial Market Stabilization Funds, (or SoFFin for short)
    It is the second of these items (the reinstatement of the SoFFIN) that the western media and 99% of investors have missed entirely. In short, Germany has given the SoFFIN:
    1. €400 billion to be used as guarantees for German banks.
    2. €80 billion to be used for the recapitalization of German banks
    3. Legislation that would permit German banks to dump their euro-zone government bonds if needed.
    That is correct. Any German bank, if it so chooses, will have the option to dump its EU sovereign bonds into the SoFFIN during a Crisis.

    In simple terms, Germany has put a €480 billion firewall around its banks. It can literally pull out of the Euro any time it wants to. The question is whether its current EU power grab is successful. If it isn’t… and other EU nations refuse to play ball (like Spain has started to) then Germany could very easily leave the Euro.”


  17. Sumo
    Yes, that’s my reading. Could be idleness – or a dinner appointment that was more pressing. You never know with this lot.


  18. MM
    If the UK government can take over three enormous banks and never once put in a clause about control of outgoings, then anything is possible.


  19. VJ
    As you would know, think of the West Wittering Building Society, and that’s about the level you’re dealing with in the Landesbanks.


  20. Kentucky
    Yup. You’re missing what the Greeks don’t have: the investment and equipment required to pump/dig it out. Even the Exxons have found this too expensive to contemplate fro quite some time now.
    But as energy prices go up and up over time then yes, Greece will be a ClubMed Denmark.
    Why else do you think the Americans would like it to be outside the eurozone and a pariah?


  21. Actually, lots of people are foreseeing German withdrawal, chiefly Max Keiser and a couple of middling wealth funds in Europe. French diplomats are paranoid about it.
    German withdrawal is a relatively unusual phenomenon. It usually requires a big bash like Stalingrad or the Battle of the Bulge to achieve it.


  22. I’m basically sickened by the MSM given that they don’t seem to be able to do simple maths.

    Greece gets 100-odd billion of debt relief in order to be granted 130 billion of new bailout debt. So they are 30 billion extra euros in the hole at the end of the process. That’s quite a deal!

    And so the BBC and chums continue to abdicate their responsibility to decipher, inform and search for truth. If I can do the maths, why can’t they??


  23. Pingback: John Ward – Greek Bailout : Uncertainty Persists As New Sovereign Liabilites Surface – 11 March 2012 | Lucas 2012 Infos

  24. Greece is not something you can amputate and throw away… even cut off it will hang around and might infect Europe, or be infected again by Europe. When you build a wall you can never be dam sure you end up on the right side!

    Shame on bank regulators! It was they who did Europe in! Many, or even most of them, are busier hiding their responsibility than fixing the disaster they caused.


  25. I quote from a favourite blog written by the legendary journalist Ian Skidmore: My favourite restaurant in the universe is Brown’s opposite the Fitzwilliam Museum in Cambridge. It is a lofty-ceilinged room, French in a Belle Epoque way, noisy with lively conversation, friendly but respectful waiters and good traditional food. Lunching there with Chinese friends I admitted to the husband, retired from a Chair in Statistics, that I had followed all the debate by economists about the Crash without understanding a single word.

    “Don’t worry,” he said, “the economists don’t understand what they are talking about either. It’s not a question of understanding them but translating. Quantative Easing, for example. That means the issue of worthless bank notes.”

    “That’s forgery,“ I said.

    “Exactly,“ he said. “There are lies, damned lies and economists.”


  26. A European Union Commissioner for Regulation“.

    LOL. That says everything we need to know about the EU. How long before the appointed person delves into social issues and regulates what clothes we are allowed to wear in public. Followed by regulating what clothes we must wear in public. Chairman Mao would’ve been in his element in this gathering madness. “European Peoples Tunic” anybody?
    When will they announce “The Great Leap Forward”? That ought to solve the overpopulation issue…


  27. And now that the “markets” have had the weekend to read the details, will they react on Monday as they should: by delivering a negative verdict with the long overdue sell-off? Or will they continue to play along and claim its the real deal and continue to be “risk on!”?

    My theory is that they will continue to pump the market in an attempt to entice real money into the game. They need ordinary fools in play to have someone to offload their worthless stocks to just before the real crash comes.

    Word to the wise gents, sensible money doesn’t want to come in, the game is up.


  28. In addtion to John’s comments…the discovery/exploitation of energy reserves goes like a bell curve. Depending on the truth/accuracy of the energy rumours, Greece may currently be at the bottom left hand side of that curve and it will take 8-12 years or so for oil to be flowing at significant levels. This is heavy engineering, especially out at sea.


  29. One can probably safely assume that if Germany was not in a *special position* regarding the EU & EZ given its history and EU dominance (it’s paranoid about being blamed if/when it all falls down), it would already have exited the Euro. It’s tactics are necessarily more complex.


  30. @CL
    Difficult one to call I feel but, on the whole I would go along with you on this one.
    I don’t think we are going to see massive drops in the markets just yet.
    They (the US) must have a plan of how they are going to deal with the CDS’s I personally think they will find legal loopholes and spend the next few years argueing and not paying out!
    Can’t feeling this is not all it seems, people hear are talking about meltdown, don’t think we are there yet.


  31. The Chinaman is abslutely right. I’ve never heard so much rubbish being spouted by ‘economists’ over this Greek mess. Most of them truly don’t have a clue what they’re talking about and are resorting to reading out official press statements. As always, the BBC is ahead of the pack on this.


  32. @kfc: Your regular view that there’s ‘a lot more to come’ is being proven correct on a daily basis… Some of us simply cannot imagine how much worse it can get… ha-ha.


  33. I tend to agree with you on this kfc. (No meltdown quite yet – though “sell in May and go away” seems as appropriate as ever).

    It may be some other unexpected external event (quite outside of the Euro/banking issues) which triggers a major sell off. Pick any one from
    – terrorism
    – war
    – earthquake
    – solar flares
    – plague

    Having spent the last 5 weeks in an investment bank in London talking to the sales guys and gals, I can assure you there are plenty of people there with brains the size of planets (actually a whole solar system in a couple of cases). They have the possibility to crunch the numbers and do the analysis – and act. Maybe there will be ‘Margin Call 2’ at some point.


  34. Viking Jack,
    The problems you have identified is why the ‘Middlestadt’ is relocating their factories to the Czech Republic and Poland.


  35. @cronshd;
    War. That would do it for me.
    America needs to reduce it’s debt mountain. It would be one way to do that.
    I also think we are heading for a oil shock.


  36. The mother of oil shocks. Bye bye petrodollar and hello to a massive shift of power eastwards.

    And then the cycle will begin anew! See you back here in about 80 years for more of the same.


  37. The fact that the Neo-con or Neoliberal economic philosophy has taken over as the choice theory in academia doesn’t help either. In Ireland economic commentators were slating people who predicted that particular mess, then they briefly changed their tune to say they knew all along & now they are again following the party line. ” Ireland is flying ” etc etc. Lap dogs are as much of a problem as those who throw them bones.


  38. And the engineering doesn’t get easier when the Turks are on record as saying that drilling (in some spots) will be seen as an act of war.


  39. @steviefinn: Quite so. On the rare occasions that TV news outlets deign to wheel on anybody who has economic views even slightly towards the Austrian line of thinking, he gets rewarded by being described as ‘controversial’ or some other epithet to indicate that he’s a whacko. Or his comments are cut short to avoid the risk of sanity spreading.


  40. @Jon: Indeed. That might explain why some of oil reserves have not been exploited for years when some people claim they were first discovered. Maybe it was the Meltemi risk… And I’m not sure how that would affect drilling in the arc south of Crete where some people claim the largest reserves exist. If earlier estimates are accurate, Greece could be looking at 40 billion barrels of recoverable oil and a lot of gas.


  41. Its a SICK JOKE.

    – Why No one asks the very simple question ( in our line of business ) :







  42. And STILL nothing on the BBC (site or broadcast) about the €30bn debt increase or the implications of the ISDA default call…

    I can see why there are those saying “Gold, canned food, guns and ammo” as when people really do wake up to the fact that we are on/about over a precipice, it could get really messy.


  43. Frustrating but not very surprising. The BBC is only a news outlet in the same way that I am a lion-tamer.

    They’ll live to regret it. when the crash comes, they will be blamed for not doing their public duty in reporting the facts to people. It’ll be a major nail in their license fee coffin.


  44. Calvo Doctrine,

    a body of international rules regulating the jurisdiction of governments over aliens and the scope of their protection by their home states, as well as the use of force in collecting indemnities.

    The doctrine was advanced by the Argentine diplomat and legal scholar Carlos Calvo, in his International Law of Europe and America in Theory and Practice (1868). It affirmed that rules governing the jurisdiction of a country over aliens and the collection of indemnities should apply equally to all nations, regardless of size. It further stated that foreigners who held property in Latin American states and who had claims against the governments of such states should apply to the courts within such nations for redress instead of seeking diplomatic intervention. Moreover, according to the doctrine, nations were not entitled to use armed force to collect debts owed them by other nations. A Calvo clause in a contract between the government of a Latin American state and an alien stipulates that the latter agrees unconditionally to the adjudication within the state concerned of any dispute between the contracting parties.

    The Calvo Doctrine
    was essentially restated by the Drago Doctrine, articulated by the Argentine foreign minister Luis María Drago in 1902. Venezuela then was indebted to Great Britain, Germany, and Italy, which threatened armed intervention to collect. Drago advised the United States government that “The public debt cannot occasion armed intervention nor even the actual occupation of the territory of American nations.” This statement against European intervention in the Americas squared with U.S. policy, as set forth in the Monroe Doctrine (1823) and the Roosevelt Corollary (1904); the U.S. government assented to the modified Drago version at the second Hague Peace Conference (1907) in the form adopted as the Porter Convention on the Limitation of the Employment of Force for the Recovery of Contract Debts. Although the United States opposed European intervention in the Americas, it reserved for itself the right, frequently used, to intervene with armed force in any Latin-American state where conditions seemed to menace U.S. interests.



  45. Thanks to Gemz…..really appreciate the link, son is comparing wind renewables Germany vs UK for his dissertation, so I thought this might be an important aside. It’s too easy to make the stats fill the brief, so anything hot off the press should be considered, I feel.


  46. Simoncz

    The banks can lend more money than in existence because the banks create new money when they make loans. There is approx £2.8tn of debt in the uk and only £2.3tn of money. 97% of the money in circulation in the uk is money created by banks (bank deposits).

    Most monetary systems in the world follow the same crazy (fractional reserve) banking system as the uk. Fractional reserve= the ability to lend more money than you have, up to the fraction you have to keep in reserve. Things started to go crazy when the fractional reserve limit was lifted by PM Thatcher allowing theoretically an infinite amount of electronic money to be created.

    I stumbled on this fact, and this superb blog some 6 months ago. Look on YouTube and search for ‘money as debt’, ‘monetary reform’ and take a look at


  47. Confused
    Any serious 24/7 news channel employing a dork like Robert Peston has to be suspect.
    Last Thursday, not one single bulletin covered the ISDA decision, or why it had taken so long to see the wood, given no trees were present.


  48. Pingback: Greek Bailout: Uncertainty Persists as New Sovereign Liabilities Surface

  49. I understand the new bonds are already trading, and trading in the range of 20-30%. If so, the formula is:

    46,5% x 0,30% = 13,95%

    Put differently: I forego 53,5% of my claims in exchange for 46,5% new and better claims. These are worth 30 cents on the Euro so altogether I now have 13,95% on my original investment.

    What did they bother going through all that for such a minimal result?


  50. I found here and ZH from reading comments to a Peston piece. The man’s doing sterling work on your behalf! ;¬)


  51. “….both now and in the past – stands accused of cheating his people and protecting himself and the equally greedy members of his Establishment clique.”

    That passage could be about practically any political leader in Europe, certainly in Ireland where I am anyway.


  52. And today, Monday 12th March, Venizelos is quoted as saying, “The credit even and triggering of the credit default swaps is something internal. This is a kind of dealing room between banks and financial entities. It’s not something important for us as a real economy. ”

    What a despicable piece of s**t that man is.


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