What a US Debt Default Could Bring

Comments Off on What a US Debt Default Could Bring

A US debt default could trigger a nightmare scenario that many economists have been warning about. Eventually this shit pile of debt will have to be dealt with but is this the moment ? One thing is for sure, this can easily be avoided but as usual politicians like to play Russian roulette.

The following are 12 very ominous warnings about what a U.S. debt default would mean for the global economy…

#1Gerald Epstein, a professor of economics at the University of Massachusetts Amherst: “If the US does default, that will make the Lehman Brothers bankruptcy look like a cakewalk”

#2Tim Bitsberger, a former Treasury official under President George W. Bush: “If we miss an interest payment, that would blow Lehman out of the water”

#3Peter Tchir, founder of New York-based TF Market Advisors: “Once the system starts to break down related to settlement and payments, then liquidity disappears, as we saw after Lehman”

#4Bill Isaac, chairman of Cincinnati-based Fifth Third Bancorp: “We can’t even imagine all the things that might happen, just like Henry Paulson couldn’t imagine all the bad things that might happen if he let Lehman go down”

#5Jim Grant, founder of Grant’s Interest Rate Observer: “Financial markets are all confidence-based. If that confidence is shaken, you have disaster.”

#6Richard Bove, VP of research at Rafferty Capital Markets: “If they seriously default on the debt, what we’re really talking about is a depression”

#7Chinese vice finance minister Zhu Guangyao: “The U.S. is clearly aware of China’s concerns about the financial stalemate [in Washington] and China’s request for the US to ensure the safety of Chinese investments.”

#8The U.S. Treasury Department: “A default would be unprecedented and has the potential to be catastrophic: credit markets could freeze, the value of the dollar could plummet, U.S. interest rates could skyrocket, the negative spillovers could reverberate around the world, and there might be a financial crisis and recession that could echo the events of 2008 or worse”

#9Goldman Sachs: “We estimate that the fiscal pull-back would amount to 9pc of GDP. If this were allowed to occur, it could lead to a rapid downturn in economic activity if not reversed quickly”

#10Simon Johnson, former chief economist for the IMF: “It would be insane to default, but it’s no longer a zero-percent probability”

#11Warren Buffett about the potential of a debt default: “It should be like nuclear bombs, basically too horrible to use”

#12Bloomberg: “Anyone who remembers the collapse of Lehman Brothers Holdings Inc. little more than five years ago knows what a global financial disaster is. A U.S. government default, just weeks away if Congress fails to raise the debt ceiling as it now threatens to do, will be an economic calamity like none the world has ever seen.”

Source: theeconomiccollapseblog.com

Finally Detroit To Default

Comments Off on Finally Detroit To Default

It was a sad day for Detroit, a once proud American city but the writing has been on the wall for quite some time. Eventually on Friday it was announced that it would stop making payments on $2.5 billion of its total $17 billion dollars of outstanding debt. Kevyn Orr, the Emergency Manager for the City of Detroit, presented to the City’s creditors the plan ahead for Detroit’s future.

DetroitHBFDetroit said Friday

it would stop making payments on about $2.5 billion in unsecured debt and ask creditors to take about 10 cents on the dollar of what the city owes them in a move to avoid what bankruptcy experts have said would be the largest municipal bankruptcy in U.S. history.

Detroit Emergency Manager Kevyn Orr spent two hours with about 180 bond insurers, pension trustees, union representatives and other creditors outlining his plan for the city’s financial future, which includes a moratorium on some principal and interest payments, Reuters reported.

Under his proposal, underfunded pension claims likely would get less than the 10 cents on the dollar.

An assessment of the plan’s progress will come in the next 30 days or so.

Orr also announced that Detroit stopped paying on its unsecured debt Friday to “conserve cash” for police, fire and other services in the city of 700,000 people. The debt not being paid includes $39 million owed to a certificate of participation.

“We will not pay that today,” Orr told reporters after the meeting with creditors at a hotel at Detroit Metropolitan Airport in Romulus.

More than 42 percent of Detroit’s 2013 revenues went to required bond, pension, health care and other payments. If the city continues operating the way it had before Orr arrived, those costs would take up nearly 65 percent of city spending by 2017, Orr’s team said.

The team also said the proposal presented Friday is the one shot to permanently fix fiscal problems that have made the city insolvent.

“We’re tapped out,” Orr was quoted by WWJ-TV as saying. “We need to come up with a plan to restructure our debt obligations and our legacy obligations going forward — that is: pension, other employee benefits, health care, so on and so forth.”

Orr said everyone involved needs to come to grips with Detroit’s dire financial situation that has been worsened by years of procrastination and denial. He said his team is prepared for potential lawsuits from creditors not pleased with the arrangements under the plan.

“If people are sincere and look at this data, you would think a rational person will step back and say, ‘This is not normal … but what choice do we have?'” Orr said.

James McTevia, president of the Detroit-area turnaround firm McTevia and Associates, said once Orr had creditors’ attention Friday, he “drew a line in the sand and said everything behind here is frozen.”

“And going forward he is positioning the city of Detroit in a place where it can pay for goods and services without going into debt,” McTevia said.

Detroit’s fiscal nightmare didn’t occur overnight. It’s been decades in the making as city leaders took out bonds at high interest rates to pay bills Detroit’s general fund couldn’t cover.

“The average Detroiter has to understand this is a culmination of years and years of kicking the can down the road,” Orr said. “We can’t borrow any more money. We started borrowing from our own pension funds.”

The city’s budget deficit could top $380 million by July 1. Orr believes Detroit’s long-term debt is more than $17 billion.

The Washington-based bankruptcy attorney hired by Michigan in March reiterated that the chances of bankruptcy are 50-50 for Detroit, the largest U.S. city placed under state oversight.

Orr is nearly three months into the 18-month job. With little time remaining on his contract, there is no time to lose. The plan creditors received in the closed-door meeting may be the only one they get.

“There may be some room for negotiations, but not a lot,” Orr told reporters. “They need to have some time to digest what they have.”

Swallowing the proposal will be tough, especially for current and retired city workers whose health care and other benefits, as well as pensions, would be cut back.

“The firefighters are going to do what we can to keep the city stable now,” Detroit Fire Fighters Association President Dan McNamara told reporters after Friday’s meeting with Orr.

McNamara said creditors were told by Orr that “we’re in a death spiral.”

The city will not be able to back up some promises related to pension and post-employment health care and benefits. Orr is proposing a $27 million to $40 million health care replacement program that will partially rely on the federal Affordable Health Care Act, health exchanges and Medicare.

He also said $1.25 billion will be set aside from concession savings over 10 years for public safety, lighting and eliminating neighborhood blight. Improving the quality of life in the city will help attract more residents and businesses, which Orr’s team says would bring more tax revenue and increase the potential for creditors to recover more of what they are owed.

Creditors were told about plans to possibly change management of Detroit’s revenue-generating Water and Sewerage Department. A separate, freestanding authority would control the department, with some annual payments coming to Detroit and the city maintaining ownership of the system.

On Friday, Moody’s Investors Service downgraded a number of Detroit bonds, including its general obligation unlimited bonds. As a result, all Detroit bonds are now below investment grade.

Hetty Chang, a vice president with Moody’s, said “the emergency manager’s proposal to creditors indicates further debt restructuring.”

“We also believe the city’s risk of bankruptcy has increased over the last six months,” she said in a statement.

Read more: Fox News

Swiss Bank Refused To Hand Over Gold

Comments Off on Swiss Bank Refused To Hand Over Gold

As a consequence of the gold takedown last week, there has been a huge interest in physical gold. Many gold dealers have had to increase premium over spot or have simply had to wait for further supplies. Jim Sinclair reports of a friend being denied his gold in an allocated Swiss account.

Today legendary trader Jim Sinclair stunned King World News when he revealed that a dear friend of his who is very affluent just had a Swiss bank refuse to return his large hoard of gold when he asked for it out of an allocated account. Below is what Sinclair, who was once called on by former Fed Chairman Paul Volcker to assist during a Wall Street crisis, had to say in this remarkable and candid interview.

Eric King: “Maguire spoke on KWN yesterday about the fact that one of his clients went to the LBMA to get the metal from them and could not get it. They told him he would be cash settled. This is what you have been talking about is the failure of the physical markets.”

Sinclair: “A person that I know with significant deposits in one of the primary Swiss banks, in allocated gold, wanted to take out his gold and was just refused on the basis of directives from the central bank….

“They told him the amount was in excess of 200,000 Swiss francs and the central bank had instructed them not to do it because it has to do with anti-terrorism and anti-money laundering precautions.

I really wonder whether those are precautions or whether the gold simply isn’t there. Now you tell me that a London delivery has basically failed. It has to raise our suspicions that the lack of physical gold behind the paper gold is literally so severe that we are coming to understand that it is in fact not there.

The gold that people think is stored is not stored, and the inventory of the warehouses for exchanges may not be holding deliverable gold. There has always been speculation about whether or not the physical gold the US claims to store is in fact in those vaults.

The greatest train robbery in history might be all of the gold, and it would only be something like we have described above that would happen right before gold makes historic highs.

There simply is no gold behind the paper. One example is AMRO, a second is your example with Maguire, and a third is my dear friend who was refused his gold on the basis that its value was too high. Remember this friend of mine had his gold in an allocated account in storage at a major Swiss bank. I repeat, there is no gold.”

Eric King: “Jim, when I listen to what you are saying, to what Maguire is saying, it really does tell me we are at the end game in terms of the paper market. It’s collapsing right now as you have been warning.”

Sinclair: “The vicious and blatant manipulation of the gold price (lower) via paper, on Friday and on Monday, may very well be the biggest mistake that the manipulators ever conceived of. I firmly believe it revealed that the price of gold has nothing to do with gold itself.

But I would add that if in fact the physical demand remains at these levels or even increases as the price of gold rises, I believe that the warehouses for the exchanges will be so significantly drawn down that it will force cash settlement.

The bottom line here is the paper market for gold may have just lit itself on fire, and served to burn the manipulators’ houses to the ground. You’ve heard of the phrase, ‘The emperor has no clothes.’ Well, this is infinitely worse because it is finally being revealed that the paper market for gold, in fact, has no gold.”

This follows on from Andrew Maguires claim’s yesterday that the LBMA has now defaulted on a client and is settling in cash.

What’s happened now is they are in a position where that leased gold is being asked for and they don’t have it.  I know of a very large client who actually turned up for his bullion, was refused his bullion, and told he would be settled in cash.  I felt I should go public with that (on KWN).

…(ABN AMRO) really was the tip of the iceberg.  What happened was that we saw that first bullion bank create the first visible default of the LBMA fractional reserve system.  I hear of other clients who are now panicking, and what happens?  You get an official intervention.  That’s what it (the takedown in gold and silver) was all about.”

Source: King World News

Was The Gold Smash Making Way For A COMEX Default ?

Comments Off on Was The Gold Smash Making Way For A COMEX Default ?

The last time we saw a major takedown of gold was in 2008 just before the Lehman default. There is no doubt that the drop in gold price was orchestrated, combined with COMEX hiking its margin rate, but was this all in preparation for a COMEX default ? There seems to be logic in this theory.


Submitted By Bill Holter, Miles Franklin Ltd,:

Last week Barrick Resources announced the postponement of their giant Pascua Lama mine.  This was to be one of the worlds largest mines and is now tied up in litigation over true ownership as it appears to show that Barrick does not have clear title.  The probale reserves were nearly 18 million ounces of Gold and almost 700 million ounces of Silver.  Work on this mine was completely ceased last Wednesday.

“Last Wednesday” was also an important day for the Kennecott copper mine in Utah, the ground started to shift more rapidly prior to this weekend’s landslide.  They knew this was coming as they closed the visitor center on April 1st and had all equipment and personel out of harms way.  This mine produces some 400,000 ounces of Gold and over 3 million ounces of Silver as a by product of copper, this is the largest copper mine on the planet.  Have you heard even a peep out of the mainstream media on this on?  I didn’t think so.
Is it not strange that these two events came to a head last Wednesday?  The same day that out of nowhere Gold reversed from being up and give up $40?  And then of course there was Friday with $85 and another $75 this morning.  Gold is now down $200 per ounce in just over 3 trading days.  Between these two projects, one not coming online and the other going off line, a VERY significant amount of production is not going to happen.  Does this make sense?  Did you not learn in school that “less” supply meant higher prices?  In the real world?
We don’t live in “the real world”, we live in a world where everything financial is manipulated.  Here is what I see happening.  They knew that this mine was going to collapse and the production would stop.  Then the ruling on the Pascua Lama mine was sent down.  Last Thursday president Obama met with 15 heads of the biggest banks and brokers in the country, THIS was discussed as sure as the Sun came up this morning: we have hit the bottom of the barrel!  Reserves that could be fed into the market are and have dried up at the same time that production has dropped and future production delayed.  The paper game is blowing up …RIGHT NOW and the topic of discussion at the White House was about “how it would play out”.
The COMEX will default in the next week or several weeks and people will be “settled” with Dollars, no more metal will be delivered!  So, knowing that “game over” has arrived, they are dumping a massive volume of  paper contracts with impunity to push the metals prices as low as possible before the “default”.  This way the “shorts” do not have to and will not be “covered” when “supply” cannot be obtained because of “an act of God”.  They will be settled in cash (at a profit no less) because these “unforeseen” disruptions in supply.  “Who could have seen it coming?” will be the mantra.  I would suspect that banking stress and “bail ins” will also become prevalent globally.  The pricing structure” will now push any and all physical sellers away from the markets and the “door” to safety is effectively being shut.  Either you own metal or you don’t.
I tried to “be nice” in my piece from last night talking to those who worry about price.  What is now happening is exactly what I spoke of, you must count ounces because “availability” is going away right here and right now!  After the closure of the COMEX and LBMA doors there will be no availability and “price” will be meaningless.  Your ability to protect yourself is right now for all intents and purposes being eliminated. 
We received  a few (very few) angry letters from customers who say that Jim Sinclair, Mr. Sprott and Embry, James Turk and others including myself are and were wrong.  That we should hang our heads in shame and that we are nothing more than charlatans hawking Gold and Silver.  We will soon, very soon see just how right or wrong we really are.  What is happening right now is very clear to me, what I don’t understand is how anyone could miss this as it has all been laid out for you and dropped in your e-box to see (for years now), understand and prepare for.  Life, all of life as we knew it is about to change forever.  Hopefully you understood this and have already prepared for it!
Regards,  Bill H.

Time For Ireland To Default

Comments Off on Time For Ireland To Default

David McWilliams writes of Greece’s latest debt deal and how the smart option for Ireland now is to default. Of course when the country is run by school teachers and ex unionists there is no chance, as their only focus is securing funds to pay public sector wages as well as their own.

McWilliams has consistently argued against Irelands odious bank debt which lets face it is just being paid back for bondholders who gambled badly. Now is the time to push for a debt deal. Unfortunately the Presstitutes refuse to debate openly the merits of reneging on payments to bankers. Equally discussion of pulling out of the euro has been muted least it catch on.

ireland toxicbankGreece has defaulted again, and the financial markets have shrugged their shoulders. The euro remained unchanged versus the dollar. The Greek stock market even rallied. What does this tell us? It tells us that, as this column has argued again and again, the markets have no memory. Because it improves the overall position of a country, a debt restructuring will be welcomed since it adheres to the golden rule: a broken balance sheet is made better by less debt not more debt.

The media is reporting this as a “deal” in Greece. It is not, it is yet another default from a country where the economy is destroyed and needs to be nursed back to health rather than punished.

The big news for Greece and for us is that the troika has accepted that the country must be healthy in order to pay debt. This logic applies to Ireland too. Before we focus on the implications of the latest Greek default for us, let’s look at the broader picture. And before you think that I am advocating we follow the Greek route, I am not, I am simply pointing out the reality of the global economy and the realpolitik at the centre of Europe.

Effectively, the troika and the Europa group of Greece’s creditors have “agreed” (rather they have had their hands forced) to restructure their bailout loans. Interest rates will be lowered and even deferred to give Greece breathing room.

The crux of the agreement is that Greece’s debt-to-GDP ratio should reach 175pc in 2016 and 124pc in 2020. So 120pc has become the new sustainability.

It has also calculated that this is how capitalism works. In a crisis, the debtor and the creditor suffer, they both lose out and that’s how the system works. It is called co-responsibility.

The eurozone’s economy is in tatters, carrying too much debt, unable to grow. Italian consumer confidence has fallen to a record low this month. It is now at the lowest level since the series began in 1996. The only countries that seem to be keeping their necks above water in Europe are Bulgaria, Romania and Poland. This is hardly a reassuring picture, is it?

As the great deleveraging continues and unpayable debts can’t be paid, it would be surprising if Athens is the only government to choose to face down its creditors.

This all brings us here to Ireland as we continue to squeeze the economy dry, foisting austerity upon austerity and the local economy falters. Next week will be more of the same. We have been at this for five years now and there is no sign of recovery. It is increasingly clear that the Irish domestic economy will not recover as long as the crushing debt burden on the country’s young workers is not lifted.

And as we all buy and sell to each other in the local economy, your spending is actually my income and my spe- nding is your income. And if we all stop spending at the same time and the Government exacerbates this by slashing spending simultaneously, who is spending? And if no one is spending, who is earning? And if no one is earning, who can possibly be saving without earning?

So you see that what sounds good for the individual, such as “I am saving”, is only good for me if others continue to spend; if we all save at the same time, there is no income.

Now as these macro-economic targets that the Government and the troika set themselves are always debt expressed as a percentage of income, if our income is falling because no one is spending, then debt expressed as a percentage of income will be rising, not falling.

Now is the time to push for a debt deal, instead of the excuses pushed by the government for nearly two years as to why they haven’t.

This is why there has to be a debt deal for these hundreds of thousands of mortgages underwater. We already have 128,000 mortgages in arrears. This figure is rising consistently. There are 400,000 tracker mortgages which will only get more expensive as interest rates eventually rise over the course of the mortgage. These people will face default when this moment arrives and our banks will be bust again.

Now is the opportunity, when the EU is doing deals all over the place, to propose a big bank solution for Ireland’s mortgage debt. Such a deal would aid the Irish recovery, the EU would have the victory it so craves and ordinary Irish people would have the debt relief they so desperately need.

This would allow the economy to breathe again and it could be made the centrepiece of Ireland’s EU Presidency in the next six months. The EU President sets the EU agenda for the period when it has this role. Let’s not miss this chance.

Otherwise Ireland will become known as the country that never misses an opportunity to miss an opportunity. The Greek deal is an opportunity; let’s not throw it away.

Source: David McWilliams

Argentina Won’t Repay Bondholders From Default 10 Years Ago Despite US Court Ruling

Comments Off on Argentina Won’t Repay Bondholders From Default 10 Years Ago Despite US Court Ruling

Despite US courts ruling that Argentina must pay bondholders who own defaulted bonds (related to $100 billion default 10 years ago), the Argentinian Finance Minister has announced this won’t happen as debt payments are immnue to US laws.

BUENOS AIRES, Nov 18 (Reuters) – Argentina will not pay creditors who own defaulted bonds despite a U.S. federal appeals court ruling in favor of the holdout creditors, the economy minister was quoted as saying in an interview published on Sunday.

The 2nd U.S. Circuit Court of Appeals in New York last month ruled that Argentina discriminated against bondholders who refused to take part in two debt restructurings as the nation tried to recover from a $100 billion default a decade ago. The decision upheld a ruling by U.S. District Judge Thomas Griesa.

The South American country appealed that ruling, and on Friday told Griesa that sovereign debt repayments made outside the United States are immune to U.S. law and seizures by holdout bondholders.

“Argentina is responsible and will fulfill all commitment it has made to its creditors. … Our creditors are all those who participated in the two restructuring proposals in 2005 and 2010,” economy minister Hernan Lorenzino told newspaper Pagina 12.

“We’re going to continue to oppose any alternative that goes beyond that. We’re going to continue presenting and defending our position to each legal entity.”

The judge is expected to give a speedy response, given that Argentina is due to start making $3.3 billion worth of payments to exchange bondholders starting Dec. 2.

Argentina and holdout bondholders that refused to join massive debt swaps in 2005 and 2010 are in a long-running battle over payment, an outgrowth of the country’s roughly $100 billion default nearly 11 years ago.

“Argentina reiterated to judge Griesa that the decision taken about pari passu (equal treatment) cannot prejudice creditors who entered the debt swaps,” Lorenzino was quoted as saying.

Last month’s ruling sparked fears that U.S. courts could ultimately inhibit debt payments to creditors who accepted terms of the restructuring, out of consideration for investors who rejected Argentina’s terms at the time.

“We’re going to continue our legal defense in all areas possible, including in the United States’ Supreme Court,” Lorenzino added.

 

Source: Reuters

Argentina Close To Default

Comments Off on Argentina Close To Default

With protests growing in Argentina against the Government the CDS shows a 60% chance of default in weeks according to ZeroHedge.

Dear Buenos Aires: we have three words of advice – “hide yo’ catamarans” (before Paul Singer comes and collects them all once you default again in what the market now deems is inevitable to occur in the next few weeks). 5Y CDS on Argentina just reverse-Baumgartnered to over 3000bps (49/53% upfront) and short-dated CDS imply a 60% probability of default (assuming a 25% recovery).

The Argentinian government under Cristina Kirchner is deeply unpopular and in recent weeks there has been a growing unrest.

Angry over inflation, crime and corruption, hundreds of thousands of Argentines of all ages flooded the capital’s streets for nearly four hours to protest against President Cristina Fernandez in Argentina’s biggest anti-government demonstration in years.

Protests were reported right across Argentina and beyond its borders.

A spokesman for Buenos Aires’ Justice and Security Ministry estimated the demonstrators in the capital at 700,000 people. Other demonstrations were held on plazas across Argentina, including in major cities such as Cordoba, Mendoza and La Plata, while protesters massed outside Argentine embassies and consulates from Chile to Australia.

In Rome, about 50 protesters, all Argentine expats, held a noisy protest outside the consulate on Via Veneto, one of the city’s landmark streets. Among the slogans being shouted was “Cristina, go away.”

About 200 demonstrators braved rain in Madrid to bang pots outside the Argentine consulate.

Approval ratings plummeting in less than a year.

Fernandez easily won re-election just a year ago with 54 percent of the vote but saw her approval rating fall to 31 percent in a nationwide survey in September by the firm Management & Fit. The poll of 2,259 people, which had an error margin of about two percentage points, also said 65 percent of respondents disapproved of her opponents’ performance.

But it’s when people are hit in the pocket that people react and inflation is biting hard.

Inflation also upsets many. The government’s much-criticized index puts inflation at about 10 percent annually, but private economists say prices are rising about three times faster than that. Real estate transactions have slowed to a standstill because of the difficulty in estimating future values, and unions that won 25 percent pay hikes only a few months ago are threatening to strike again unless the government comes up with more.

Source: ZeroHedge, LasVegasSun

 

Japan To Shaft Its Bondholders? Looks that Way.

Comments Off on Japan To Shaft Its Bondholders? Looks that Way.

Who would have thought that the Japanese Department of Finance would announce formally on its website that holders of Japanese bonds have to join the queue to get repaid when the time comes. A carefully worded response in its FAQ by the MoF, gave no clear indication that bonds would be definitely repaid when they mature rather that they would “redeem them responsibly”.

 

This has got to be the icing on the Japanese cake. The otherwise bland website of the Japanese Ministry of Finance, more specifically the FAQ page on government bonds, has been catapulted to stardom on Facebook and Twitter. Not in a good way. As you flip through the MoF’s website, page after page, you will mostly see zero Facebook likes and zero tweets. Social media and the MoF ignore each other.

But go to the FAQ page, skip down past the categories of Budget, Taxation, and Tariffs to item 4, Government bonds. Under the second group, skip past Tax questions for individuals, Miscellaneous (Is it a crime if I make a copy?), Price and yield questions, and Coupons to the infamous question 5: “In case Japan becomes insolvent, what will happen to government bonds?

Tweeted 1,645 times, liked on Facebook 3,733 times!

The MoF website isn’t some blog to be ignored (at your own risk) but the official voice of the most important ministry of the most indebted country in the world, whose debt will reach 240% of GDP by the end of this fiscal year. The country borrows over 50% of every yen it spends, and it spends more every year. With no solution in sight. Other than more borrowing. Certainly not cutting the budget, which would be too painful. It wouldn’t be enough anyway. Even cutting the budget in half would leave a deficit. And the recently passed consumption tax increase? It will raise the tax from its current 5% to 8% in 2014 and to 10% in 2015, way too little to deal with the gigantic problem, and years too late. Yet it won’t kick in unless GDP grows at least 2% per year—which has practically no chance of happening.

No, there is no longer a good solution. And everyone knows it.

About 95% of Japan’s debt is held within Japan by government-owned institutions, the Bank of Japan, banks, companies, pension funds, and directly or indirectly by individuals. Hence the question—”In case Japan becomes insolvent, what will happen to government bonds?”—is of primordial importance to just about all Japanese adults.

The question and its answer weren’t decided by some underling. Each word was carefully weighed by experts in the highly hierarchical bureaucracy of the MoF. As these words were polished and examined for every nuance, they were passed up the ladder until they landed on the desk of an official at the very top who approved not only the wording, but also whether or not that question should even be on the website. And the official answer is:

 “Rest assured that the Japanese government will redeem the bonds responsibly.”

“Rest assured!” How bondholders can possibly rest assured under these circumstances remains a mystery, in particular since the MoF then proceeds to tell them exactly how they will get kicked in the groin: bonds will be redeemed “responsibly.”

Not when they mature, but responsibly.

Thus, we have the MoF’s official action plan for the moment when the big S hits the fan, the moment when Japan with its declining wages and shrinking working-age population can no longer save enough to mop up all the government bonds necessary to keep the government afloat [read…. Japan’s Slow-Motion Tsunami].

A selective default. Bonds will retain their “value,” but the government won’t redeem them when they mature. It will redeem them in bits and pieces, stretched into all eternity, as it sees fit. You’ll die before you’ll see your money.

This is THE answer, the official answer we’ve been looking for all along, and now we find it on the MoF website where it would have remained hidden in plain sight had not some enraged Japanese spread the word via Twitter and Facebook.

When the legendary savings of the Japanese are drying up, as they’re in the process of doing, the word responsibly will take on a new meaning within the context of one of the greatest recent acts of governmental irresponsibility: creating that debt monster in the first place.

 

Source: TestosteronePit

Greece Is Printing Its Own Euros And Everyone Turns A Blind Eye

Comments Off on Greece Is Printing Its Own Euros And Everyone Turns A Blind Eye

Nobody is brave enough to finally pull the plug on Greece and force it to exit the euro so the game continues. The Troika are due to release their report in September but in the meantime on 20 August a €3.2 billion bond is due to be paid. The ECB has stopped accepting Greek collateral. So where does Greece get its funding from? And here lies the fragility of the monetary system because Greek is printing its own money and everyone is turning  a blind eye.

A lot of politicians in Germany, but also in other countries, issue zingers about a Greek exit from the Eurozone and the end of their patience. Yet those with decision-making power play for time. They want someone else to do the job. Suddenly Greece is out of money again. It would default on everything, from bonds held by central banks to internal obligations. On August 20. The day a €3.2 billion bond that had landed on the balance sheet of the European Central Bank would mature. Europe would be on vacation. It would be mayhem. And somebody would get blamed.

So who the heck had turned off the dang spigot? At first, it was the Troika—the austerity and bailout gang from the ECB, the EU, and the IMF. It was supposed to send Greece €31.2 billion in June. But during the election chaos, Greek politicians threatened to abandon structural reforms, reverse austerity measures already implemented, rehire laid-off workers….

The Troika got cold feet. Instead of sending the payment, it promised to send its inspectors. It would drag its feet and write reports. It would take till September—knowing that Greece wouldn’t make it past August 20. Then it let the firebrand politicians stew in their own juices.

 

In late July, the inspectors returned to Athens yet again and left on Sunday. After another visit at the end of August, they’ll release their final report in September. A big faceless document on which people of different nationalities labored for months; a lot of politicians can hide behind it. Even Merkel. And the Bundestag, which gets to have a say each time the EFSF disburses bailout funds.

Alas, August 20 is the out-of-money date. September is irrelevant. Because someone else turned off the spigot. Um, the ECB. Two weeks ago, it stopped accepting Greek government bonds as collateral for its repurchase operations, thus cutting Greek banks off their lifeline. Greece asked for a bridge loan to get through the summer, which the ECB rejected. Greece asked for a delay in repaying the €3.2 billion bond maturing on August 20, which the ECB also rejected though the bond was decomposing on its balance sheet. It would kick Greece into default. And the ECB would be blamed.

But the ECB has a public face, President Mario Draghi. He didn’t want history books pointing at him. So the ECB switched gears. It allowed Greece to sell worthless treasury bills with maturities of three and six months to its own bankrupt and bailed out banks. Under the Emergency Liquidity Assistance (ELA), the banks would hand these T-bills to the Bank of Greece (central bank) as collateral in exchange for real euros, which the banks would then pass to the government. Thus, the Bank of Greece would fund the Greek government.

Its against the governing treaties but when has that stopped the elites in the EU who can break the rules whenever it suits them. As Eddie Van Halen once said, “To hell with the rules. If it sounds right, then it is.”

Precisely what is prohibited under the treaties that govern the ECB and the Eurosystem of central banks. But voila. Out-of-money Greece now prints its own euros! The ECB approved it. The ever so vigilant Bundesbank acquiesced. No one wanted to get blamed for Greece’s default.

If Greece defaults in September, these T-bills in the hands of the Bank of Greece will remain in the Eurosystem, and all remaining Eurozone countries will get to eat the loss. €3.5 billion or more may be printed in this manner. The cost of keeping Greece in the Eurozone a few more weeks. And on Tuesday, Greece “sold” the first batch, €812.5 million of 6-month T-bills with a yield of 4.68%. Hallelujah.

“We don’t have any time to lose,” said Eurogroup President Jean-Claude Juncker. The euro must be saved “by all available means.” And clearly, his strategy is being implemented by hook or crook. Then he gave a stunning interview. At first, he was just jabbering about Greece, whose exit wouldn’t happen “before the end of autumn.” But suddenly the floodgates opened, and deeply chilling existential pessimism not only about the euro but about the future of the continent poured out. Read….. Top Honcho Jean-Claude Juncker: “Europeans are dwarfs”

Source: Testosteronepit.com

Spain: Close To the Edge And Soon To Be Eating Manure

Comments Off on Spain: Close To the Edge And Soon To Be Eating Manure

As reported in ZeroHedge, Spanish bond yields went over 7% and the Budget Minister in the Spanish Parliament this morning came out with the line 

“There’s no money in the public coffers.”

What a start to the day but it got even worse than that from the Minister

The Budget Minister went on in Parliament, this morning, to proclaim that “There is no money to pay for public services” which is quite a statement to make after the Prime Minister had told everyone that Spain was fine and that only the banks were having some issues. Of course this same Prime Minister said bailing out the Spanish banks was a “Great victory for Europe” so we already know that he is suffering from some serious psychological deficiencies and needs some help. Poor Mr. Rajoy; where is Sigmund Freud when you need him?

“The European Central Bank intervened in the secondary market to buy public debt to avoid the European monetary system collapsing. Spain would have collapsed without this intervention.”

                  -Budget Minister Montoro in Parliament this morning in Madrid.

Economists are not noted for their humour but this story is a classic.

Recently two noted Spanish economists were interviewed. One was always an optimist and one was always a pessimist. The optimist droned on and on about how bad things were in Spain, the dire situation with the regional debt, the huge problems overtaking the Spanish banks and the imminent collapse of the Spanish economy. In the end he said that the situation was so bad that the Spanish people were going to have to eat manure. The pessimist was shocked by the comments of his colleague who had never heard him speak in such a manner. When it was the pessimist’s turn to speak he said that he agreed with the optimist with one exception; the manure would soon run out.

 

Greece Must Remain In Euro, Otherwise Its Success Outside, Would Encourage Others To Leave

Comments Off on Greece Must Remain In Euro, Otherwise Its Success Outside, Would Encourage Others To Leave

Normally a country in debt crisis would devalue its currency, suffer short-term pain and then reap the rewards of instantly being cheaper. Although in the case of Greece which doesn’t have a strong export industry it would still have a massive benefit if it was to leave the euro. In the case of Iceland, it successfully devalued and is growing its economy again, although it has mainly escaped the attentions of the presstitutes. There you have it, the MSM and EUssr does not want Iceland’s success story to be told for the same reason it doesn’t want Greece to leave the euro, because it knows this is the correct way to handle the debt crisis and other countries would want to follow.

The elites of the EUssr are desperate for Greece to remain with the euro because its eventual successful recovery with a new currency with cause the euro to collapse. Consider the following article on FT from Arvind Subramanian (a Senior Fellow at the Peter G. Peterson Institute for International Economics, which counts amongst its directors numerous influential Bilderberg members, including former Federal Reserve chairman Paul Volcker, former United States Treasury Secretary Lawrence Summers, and Bilderberg kingpin David Rockefeller). Someone is scared!!!

Expelled from the eurozone, Greece might prove more dangerous to the system than it ever was inside it – by providing a model of successful recovery.

There is an overlooked scenario in which default is not a disaster for Greece. If this is the case, the real, more existential threat to the eurozone might be a very different one, in which the Greeks have the last laugh. Consider that scenario.

The immediate consequences of Greece leaving or being forced out of the eurozone would certainly be devastating. Capital flight would intensify, fuelling depreciation and inflation. All existing contracts would need to be redenominated and renegotiated, creating financial chaos. Perhaps most politically devastating, fiscal austerity might actually need to intensify, since Greece still runs a primary deficit, which it would have to correct if EU and International Monetary Fund financing vanished.

But this process would also produce a substantially depreciated exchange rate (50 drachmas to the euro, anyone?) And that would set in motion a process of adjustment that would soon reorientate the economy and put it on a path of sustainable growth. In fact, Greek growth would probably surge, possibly for a prolonged period, if it adopted sensible policies to restore rapidly and sustain macroeconomic stability.

Examples of successful devaluations

What is the evidence? Just look at what happened to the countries that defaulted and devalued during the financial crises of the 1990s. They all initially suffered severe contractions. But the recessions lasted only one or two years. Then came the rebound. South Korea posted nine years of growth averaging nearly 6 per cent. Indonesia, which experienced a wave of defaults that toppled nearly every bank in the entire system, registered growth above 5 per cent for a similar period; Argentina close to 8 per cent; and Russia above 7 per cent. The historical record shows clearly that there is life after financial crises.

This would also be true in Greece, even allowing for the particularities of its situation. Greece’s low export-to-GDP ratio is often said to preclude the possibility of high export-led growth. But that argument is not ironclad because crises can lead to dramatic reorientations of the economy. India, for example, managed to double its similarly low export-to-GDP ratio within a decade after its crisis in 1991, and doubled it again in the following decade even without a big currency depreciation.

To put in context, Greece’s successful potential exit from the euro could have massive ramifications. Germany may have to concede way more ground to hang on to its free lunch.
Suppose that by mid-2013 Greece’s economy is recovering, while the rest of the eurozone remains in recession. The effect on austerity-addled Spain, Portugal and even Italy would be powerful. Voters there would not fail to notice the improving condition of their hitherto scorned Greek neighbour. They would start to ask why their own governments should not follow the Greek path and voice a preference for leaving the eurozone. In other words, the Greek experience could fundamentally alter the incentives for these countries to remain in the eurozone, especially if economic conditions remained grim.

At this stage, politics in Germany would also be affected. Today, Germany grudgingly does the minimum needed to keep the eurozone intact. If exit to emulate Greece becomes an attractive proposition, Germany will be put on the spot – and the magnanimity it shows in place of its current miserliness will be the ultimate test of how much it values the eurozone. The answer might prove surprising. The German public might suddenly realise that the eurozone confers on Germany not one but two “exorbitant privileges”: low interest rates as the haven for European capital and a competitive exchange rate by being hitched to weaker partners. In that case, Germany would have to offer its partners a much more attractive deal to keep them in the eurozone.

Such a scenario would be rich in irony. Greece is viewed as the pariah polluting the eurozone; its expulsion might make it a far bigger threat to the single currency’s survival. If a eurozone exit creates the conditions for a rebound in Greece, it may prove an infectious model. The ongoing Greek tragedy could yet turn out not too badly for the Greeks. But tragedy it might well be for the eurozone and perhaps for the European project.

What Happens When A Country Defaults

5 Comments

From The Financial Times

What Is Next For Greece?

Comments Off on What Is Next For Greece?

In all probability Greece will hold elections as it seem very unlikely now that a coalition can be formed. What has not been discussed is on May 15th Greece has bond redemptions worth €450 million which are governed under English Law. These were the bonds that refused to be restructured earlier in the year. The big question, with no government in place what happens to the repayment of these bonds and will Greece end up defaulting on them?

New elections have been mooted for some time in June but the new Government faces the prospect of putting together medium term spending plan for 2013/2014 which is due to be delivered to the Troika for June 30.

ZeroHedge write as follows

Timeline of events for Greece

The next weeks are crucial for Greece, as political paralysis could threaten the new program, potentially triggering tail risk scenarios that could eventually result in an exit from the euro area. New elections in June (10 or 17 June) appear very likely, but it remains unclear whether these would deliver a government that implements the agreed-upon program, or even a government at all. At this stage, based on media reports, in our view two options still appear to be on the table: a coalition led by New Democracy that allows for further muddling through, and, with similar probability, a government led by Syriza that refuses the Troika program and eventually is forced by a collapsing economy to exit the euro. A low probability scenario would be a temporary exit, as that would implicitly include support from the EU.

 If Greece was to leave the Euro what would the consequences be?

Before Greece decides to default and eventually exit the euro, the country could face the temptation of closing its budget deficit by using IOUs to pay salaries and fund a bank recapitalisation, which risks establishing a shadow currency. How long Greece could be within the euro and live with its own internal currency is an open debate. The main issue in our view, would be that this domestic shadow currency would not enable Greece to fund its current account deficit, making it likely that Greece would default on its external debt (about €370 billion including portfolio and other foreign investment liabilities).

In the event of a default and an exit scenario, Greece must reintroduce its own currency and ensure the proper functioning of its banking sector. Failure to meet its payments would put Greece into default position, the effects of which could in our view result in the following:

  • Deposit flight would be very likely (not only in Greece but possibly spreading to other peripheral banks). Indeed, Greek banks have already lost 30% of heir private sector deposits since their peak in late 2009.
  • Greek banks would likely require an immediate recapitalization and face a liquidity shortfall, given that Greek debt would no longer be eligible as collateral for ECB operations (through Target 2 Greek NCB owes about €109bn to the ECB; although the ESCB holds c.€50bn of government bonds directly through the SMP). And, the ECB would likely veto the Emergency Liquidity Assistance (another €60bn) following a default, again making an exit from the euro area likely following a default.

The consequences for the other eurozone countries would mean a downgrade as Fitch has already threatened if Greece leaves. Although this might not affect Portugal and Ireland for the moment because they are in a program with the Troika it would have massive implications for the other eurozone countries hit with a downgrade.

ZeroHedge writes of actions needed should a Greek exit and default happen.

Given the contagion risks to large countries, the piecemeal approach with limited commitment would have to be replaced by the “full bazooka.”

  • The ECB could cut rates to 0.50%, and renew its liquidity provisions (most likely in the form of another 3-year LTRO); The ECB would probably have to commit to buy unlimited amounts of Spanish and Italian government debt to stop contagion to these countries. This commitment would have to be supported by all remaining euro area countries to be credible and require a renouncement of the ECB’s effective senior creditor status.
  • Major central banks could open currency swap lines to avoid funding problems in major currencies, as during 2008/09, but possibly at lower costs.
  • Banks would have to be ring-fenced, via deposit guarantees and capital injections, over and above the ECB’s liquidity support described above. This would possibly entail state injection of capital (even if only in the form of promissory notes), ie, nationalization, or European money (euroization). The deposit guarantee would have to be backed jointly by euro area governments to be credible.
  • A European funded bank recapitalization, a European deposit insurance scheme, as well as the ECB’s purchases of government bonds would require further surrendering of fiscal power to the European Commission.
  • Capital controls would potentially need to be introduced between the euro area and the rest of the world. Such controls are allowed under special circumstances that could threaten stability, and the scenario under consideration clearly qualifies.
  • Going forward, the fiscal stance as well as other economic policies (such as industrial policy) would have to be redesigned at the euro area level to ensure growth could kick start as quickly as possible

Source: ZeroHedge

Cases In Irish Courts Point To Mass Defaults To Come

2 Comments

David McWilliams writes for the Irish Independent of cases currently going through the Irish Court system and points out that this is a sign of mass defaults that are to come. As David sat in court observing so big names including being pursued by the banks for millions what of the millions of struggling taxpayers saddled with huge personal debt.

And this is the point of it all, down at the courts we see a huge amount of effort and huff and puff much of which is pointless because so many people and companies are bust.

And it is only the tip of the iceberg. The next phase of the Irish economy’s story won’t be the recovery but the mass default phase and it will imply the banks will need yet more capital. When that capital is unforthcoming, we will have another bank crisis.

The banks don’t have the capital necessary to foreclose on thousands of defaulters. If they foreclosed now, they’d simply go bust. However, by not actively foreclosing they will just go bust passively, slowly, zombie-like.

The charade replayed every day at the Four Courts is the canary in Ireland’s default coalmine. The people yesterday in the courts are those who can still afford the theatre of defence. For most debtors, this is a luxury that only the “soon-to-be-poor” can still indulge.

This is only the beginning.

Far from the majesty of the Four Courts, lies the County Registrar’s Court. Here we see what’s going on further down the food chain. This is where the small fry — those thousands who borrowed too much to finance the first-time houses — are being pursued by banks.

The banks, which have been bailed out by the State, are not down here yet because of the implicit “moratorium” against foreclosing given in exchange for state money. But this won’t go on indefinitely because the longer the banks remain zombies, the more the real productive part of the economy grinds to a halt for the want of credit.

Finally a great realistic sumation of the economy by McWilliams.

It might have escaped you with all the talk of China and referendums and promissory notes, but Ireland slumped back into recession last week. House prices fell more in February than ever before and unemployment and emigration continue to rise. As basic economics suggests, too much debt combined with asset price deflation and an overvalued currency without the ability to print our own currency tend to strangle the economy.

Delusional Eurocrats Think EveryThing Is Alright

Comments Off on Delusional Eurocrats Think EveryThing Is Alright

Nigel Farage MEP humourously sums up Van Rompuy and Barroso’s positive spin to Greece’s default and probable 3rd bailout.

 

Lesson For Ireland In Greece’s Default

Comments Off on Lesson For Ireland In Greece’s Default

Every since the banks went bust in Ireland the politicians have been saying that the taxpayers have to pay back the bank’s debt. If they didn’t repay those debts it would have disastrous consequences. Well if Iceland’s experience hasn’t proved this to be false, the Greece default last week certainly has. David McWilliams had this to say

Now there we were, thinking that financial markets didn’t like defaults. In fact, we were warned that if we were to do something as dastardly as not pay Anglo unsecured creditors, the sky would fall in. This line has been followed by our state as if it were gospel.

Yet on Friday, we see that not only is it not gospel, it is nonsense. The financial markets didn’t sell off, but rallied enthusiastically after the news that Greece had defaulted spectacularly on sovereign debt, not bank debt. So the markets that lent Greece money rallied on the news that Greece wasn’t going to pay the money back.

The largest sovereign default ever – and the only one in a developed country in 60 years – was embraced by the financial markets. In fact, for what it’s worth, the Greek stock market rallied too.

So what does this tell us?

It tells us that financial markets have no memory. They move on. It also means that when something becomes inevitable, sensible people accept it and make provisions. The fact that the default was not orderly or chaotic makes no real difference. Only weeks ago, creditors of Greece were saying that they wouldn’t accept default (as if they had a choice).

………

So what happened to the so-called vindictive financial markets, and what they would do to Greece if Greece defaulted? They rolled over. And what about the ATMs? Remember the notion that the ATMs wouldn’t work if bondholders didn’t get paid? Well, ATMs worked just fine in Athens on Friday evening.
More significant has been the U-turn by the troika. A few months ago, the EU view was that no default could be contemplated yet, on Friday, even the so-called hard-line Wolfgang SchÌuble, German finance minister, called the deal an “historic opportunity for the country”.

What of Ireland’s future

Now what does all this mean for us in Ireland, as we move forward?
It means that we, too, will get a debt deal on banking debt, not just the promissory note. The question is whether we are best to go for it now or wait for something much bigger down the road.

 

Greece Defaults First – Who Is Next?

Comments Off on Greece Defaults First – Who Is Next?

Call it anything you want, but Greece’s defaulting restructuring of its debts has officially being called a credit event which will trigger credit-default swap contracts by the International Swaps and Derivatives Association. Thats a default by any other name. Question is, what happens next. Although ISDA says only €3.2 billion has been triggered in credit-default swap contracts, the Huffington Post has  this to say;

If you remove all hedges and offsetting swaps, there’s about $70 billion in default-insurance exposure to Greece out there, which is a little bit bigger pill for the banking system to swallow. Is it possible that some banks won’t be able to pay on their default policies? We’ll find out.

Greeece’s restructuring is not so straight forward now. But what of the collective action clauses that Greece invoked. Remember that these were used retrospectively. Ambrose Evans-Pritchard wrote

The Greek parliament’s retroactive law last month to insert collective action clauses (CACs) into its bonds to coerce creditor hold-outs has added a fresh twist. These CAC’s are likely to be activated over coming days. Use of retroactive laws to change contracts is anathema in credit markets.

Many now believe that Portugal is next in line.

Right now, the combination of all public and private debt in Portugal comes to a grand total of 360 percent of GDP.

In Greece, the combined total of all public and private debt is about 100 percentage points less than that.

So yes, Portugal is heading for a world of hurt.  The following is more about Portugal from the recent Telegraph article mentioned above….

Citigroup expects the economy to contract by 5.7pc this year, warning that bondholders may face a 50pc haircut by the end of the year. Portugal’s €78bn loan package from the EU-IMF Troika is already large enough to crowd out private creditors, reducing them to ever more junior status.

The truth is that the European financial system is a house of cards that could come crashing down at any time.

German economist Hans-Werner Sinn is even convinced that the European Central Bank itself could collapse.

After the major restructuring if its debts, how do you think Greece is fairing?

The Greek economy has been in recession for five years in a row and it continues to shrink at a frightening pace.  Greek GDP was 7.5 percent smaller during the 4th quarter of 2011 than it was during the 4th quarter of 2010.

Unemployment in Greece also continues to get worse.

The average unemployment rate in Greece in 2010 was 12.5 percent.  During 2011, the average unemployment rate was 17.3 percent, and in December the unemployment rate in Greece was 21.0 percent.

Young people are getting hit the hardest.  The youth unemployment rate in Greece is up to an all-time record of 51.1 percent.

The suicide rate in Greece is also at an all-time record high.

Source: theeconomiccollapseblog.com

Greece Default Update From The Slog

1 Comment

Last week “The Slog” reported that the Greeks were due to officially be declared in default by the rating agencies on March 23. Today Fitch downgraded Greece to C from CCC but his sources have since clarified further information:

“The main bond swap is scheduled for March 10,” a Washington insider told me within the last hour, “and at that point, they [Fitch] will name the event as a technical default. So now everyone wants to know what the ramifications are for insurance. That’ll depend on what deal, say, Hedge Funds have signed with specific insurers. But you could certainly speculate that some insurance will be triggered.”

And then to add insult to injury for the Greek people, it looks like their general election is to be postponed.

Meanwhile, following the Greek Environment minister’s suggestion that the elections in Greece be further postponed, there is widespread speculation in Athens that Goldman Sachs implant Prime Minister Lucas Papademos is under pressure to announce this formally.

CDS Implications Of A Greek Default

Comments Off on CDS Implications Of A Greek Default

While the ECB has been busy using LTRO to capitalise european banks in preparation for a Greek default, are they sure that the contagion can be contained. One thing is for sure and that is nobody knows for sure. Keith Barron gave an interview on KingWorldNews and spoke about the insurance of these Greek bonds and explained potentially a Greek default could be disastrous.

“There are basically three times the amount of bonds out there, existing in contracts, to insure those bonds.  Now you have to remember that a lot of these contracts were signed when all of these bonds were considered AAA rated.  People didn’t believe they would default.

So their is huge exposure in these dangerous contracts.  There was one contract I saw that was going to pay 500 to 1 for the loss.  These things are incredibly toxic contracts confronting the system right now.  We don’t know who the counterparties are, and in many cases it’s hypothecated two or three times and it’s something that’s worldwide.

We are looking at financial Armageddon.  This is just awful, Lehman times 1,000.  This is why they are going to all of these crazy extremes and calisthenics to make it seem like Greece is not defaulting so the bond insurance doesn’t kick in.  They are trying to call it ‘an organized settlement.’  But a default is a default.  This will ultimately end up in the courts.  

 Based on Barron’s experience of watching currencies collapse, he added

You have to consider that if Europe is going down, then the euro is going to turn into Monopoly money.  It’s going to be rubbish.  I would avoid anything that is euro denominated like the plague.  The Americans could be left holding the bag with a lot of this.  The current administration in America has doubled the money supply since taking office, but that’s nothing compared to what’s going to happen.

You have the potential here to see multiple Weimar type hyperinflations.  People may say I’m alarmist or crazy talking about this, but I’ve lived in many countries in South America and I have seen various currencies go to zero.  I’ve seen it many times.  I was in Russia when they re-stamped all of the currency from one to one hundred.  In Kazakhstan I saw the same thing.  I saw the Brazilian cruzeiro become worthless.  I watched the Argentinean currency go to zero.  This is something that can happen.

It’s extremely important to have physical gold in this environment.  It’s not good enough to own gold in an ETF.  You need to have something you can put your hands on.  You need to have gold and you need to have silver, something that will protect your wealth if the whole system goes down.

The bottom line is this may not happen.  But even if things get very stressed in the system, it will be incredibly difficult for people to get their hands on physical gold or silver.”

 

Plan For Greece Default Is 23rd March

Comments Off on Plan For Greece Default Is 23rd March

A plan for a Greek default for close of business Friday 23rd March has been leaked by The Slog website. It is claimed that the firm date and written actions was circulating since January.

A written document giving firm dates and detailed actions for a planned Greek default has been in the possession of two top Wall Street bank currency trading bosses since the second week in January. The Slog has separate but corroborative sources affirming the existence of the document, and a conviction among senior bank staff that – at least at the time – the plan represented “a timetable, not a contingency”. The plan gives a firm date of March 23rd for default to be announced after the close of business.

One of the banks is Barclays Capital (Barcap) run by controversial figure Bob Diamond. The other must remain anonymous for the time being, in order to protect sources.

So what happens on Friday 23rd March?

The document asserts that Greece will officially be declared in default by all the ratings agencies after the close of business on Friday march 23rd . At the weekend all Greek bank accounts will be frozen, with emergency measures detailed to prevent the flight of capital. Included in the paperwork is a list of very limited exceptions to the ‘no withdrawals’ order. All major banks ‘are instructed  not to deal with euro exchange  as of open of business in Greece on Monday 25th march. All Greek markets will close for one day ‘at least’.

Evidence to support the claim

In particular, the alleged creation of the document both supports (and/or coincides closely with):

1. Washington going cold on further IMF funding

2. IMF intervention in the Athens debt talks

3. Persistent rumours surrounding Wolfgang Schauble’s plans

4. Evidence previously assembled by The Slog  concerning Americo-German coordination

5. A string of delaying tactics by senior EU and Troika officials since mid January.

I recommend reading the full article which gives a timeline of recent events leading up to the present.

Older Entries

%d bloggers like this: