The secret plot to derail the Greek bailout

Warning:  This is a very long post but a very important one to read...  

** To break up a potentially long read, we have injected photos of butterflies, both because they are lovely to look at and they symbolize 're-birth' which is the grande theme of this post.  We talk of Greece trying to prevent default... if it was a caterpillar, it would be like trying to prevent chrysalis.

So we begin..  

There are two ways a corporation or nation defaults..

1)  The corporation or nation openly declares bankruptcy

2)  The corporation or nation does everything humanly possible to avoid it but powerful forces behind the scenes ensures it happens to their benefit

Greece should have taken option #1, for revenge sake

Instead in spite of public pronouncements and agreements to the contrary, they are being forced into option #2, and to be honest, we are unsure if the Greek leadership, much less the people even know or understand this...

We at A&G have done much research and have written extensively on this topic, not because our focus is usually Greek concerns or possess any ethnic or emotional ties to the country.    We cover it because we see the default at minimum as the first 'Victory' in the war against banking and finance; the first Real and Genuine pain the financial elites will feel since September, 2008.   

And when it comes, it will be long overdue.

As we said previously, we've done much study and there are two questions we couldn't fully understand in this geopolitical chess game-  1) Why was an agreement made in Brussels on Sunday night when many of the involved parties truly want Greece to default and be gone from the euro?, and 2)  What role is the US playing, especially financially in this kabuki, especially since everyone knows the US bails out the world?

After reading an array of sources, we feel we finally have a much better understanding of the complex theater being enacted before our eyes and can piece together a timeline as to what has happened recently and what is going to occur over the next four weeks (Greece must pay its next installment of debts by March 20th- that is not a flexible date)

On Monday, January 16th, Presidential staff and Fed advisers convened with a dozen or more top Wall Street bankers. Its purpose was to brief a select group on the White House and Geithner approved operation to amputate the eurozone’s obviously gangrenous Greek leg.

Just 24 hours later, a remarkable undercover bailout slush fund was set up for the use of the ECB under Mario Draghi. On that day, the financial website Wealth Wire posted a piece suggesting the Fed was ‘up to something mysterious', and Jonathon Trugman of the New York Post’s financial desk wrote this: ‘Essentially, we just bailed out Europe’s banking system with the full faith and credit of the United States’.

Subsequently, a former Fed official told the Wall Street Journal that the Reserve was indeed bailing out Europe by operating in the shadows – aka a loan masquerading as a currency swap.

Former Vice President of the Federal Reserve bank of Dallas, Gerald O’Driscoll told the Journal:

“The Fed is using what is termed a “temporary U.S. dollar liquidity swap arrangement” with the European Central Bank (ECB).  Simply put, the Fed trades or “swaps” dollars for euros. The Fed is compensated by payment of an interest rate (currently 50 basis points, or one-half of 1%) above the overnight index swap rate. The ECB, which guarantees to return the dollars at an exchange rate fixed at the time the original swap is made, then lends the dollars to European banks of its choosing.

The two central banks [ECB and US] are engaging in this roundabout procedure because each needs a fig leaf. The Fed was embarrassed by the revelations of its prior largess with foreign banks. It does not want the debt of foreign banks on its books. A currency swap with the ECB is not technically a loan.”

Well, swap or loan, it all went into the eurobank prop-up operation.  During the period following that transfer, the ECB lent $483bn in various amounts to just over 500 banks in the eurozone. 

So let's stop here and refresh what's happened so far-  US taxpayer $$ has been used once again to bailout Europe's banks and financial institutions.  If you ever wonder how the US has so much pull and sway in the UN and in economic, military and geopolitical affairs, perhaps this type of 'deal' answers it.

Let's continue..

That swap i.e. 'loan' deal was outlined to the key Wall St players on January 16th. In a nutshell, it was “We bale out the eurobanks for Mario, and in return they [the EU States] build a firewall around Greece”. It was the start of what became known as ‘amputate and cauterise’. Goldman Sachs played a pivotal role in the session.

The US view is this: Greece must default outside the euro, and become a leper.  Secretary Geithner thinks the Europeans don’t have the money to make the banks ultra-safe…and that means an immediate contagion blowback to the US, with disastrous consequences. (It also means Obama's re-election chances are severely hindered if the US experiences anything close to another 'Lehman') 

So we, the US, must covertly help the ECB render the eurobanks safe – and in return, they need to step up to the plate by leveraging whatever firepower they need to ensure the whole mess stops at Greece.

Simple.

The key players at this meeting were Timothy Geithner, Goldman Sachs' Lloyd Blankfein, a tight group of White House Obamites, Ben Bernanke (at “a safe distance”), Mario Draghi, and IMF boss Christine Lagarde.  The President as well as Secretary of State, Hillary Clinton were fully aware of the meeting but neither attended.

As a consequence, from this point onwards Christine Lagarde began to play serious hardball about the need for a massive firewall investment by EU member States. Concurrently, Secretary Clinton applied every ounce of available pressure to the Sino-Japanese credit line as a potential further source of bricks in the wall.

Clinton’s State Department seems to have had some degree of success. Less so Lagarde: she has come up hard against Berlin’s refusal to expose Germany further.

The view in the Fed and Washington is that the Europeans are welching on the deal which is peculiar since really they never had Berlin on board in the first place.  Germany does not want to expose themselves to even greater debt, and recently their legislative body enacted legislation prohibiting it.  At the recent G-20 meeting, Lagarde has threatened to pull funding for the Greek bailout unless the IMF gets their way and a 750bil euro firewall is created.

So that's were things stand today, February 24th.  Everyone wants a Greek default except for the 'chess piece' in the game that should have wanted it all along, and thus now is reduced its significance to that of scapegoat 'pawn' -- Greece.

And in case you think we didn't provide enough evidence to explain why Greece will be defaulting soon (even if it doesn't want to), here's a few more reasons:

* The credit rating agency S&P today joined Fitch and Credit Suisse in seeing the Greek Bailout as akin to 'default'.  From appearances, it seems all will call default one second after the bond swap officially takes place. Whether that triggers CDS (credit default swaps) remains to be seen...

* The Greek consitutional change demanded by the Troika (to hierachise debt before other expenditure) will not be possible by the Greek bailout closure date. And they knew that all along.

* European creditor countries are demanding 38 specific changes in Greek tax, spending and wage policies by the end of this month and have laid out extra reforms that amount to micromanaging the country’s government for two years, according to the Financial Times. There is no way the Greeks will stand for that either.  The program is being set up to fail, as many of these conditions will be impossible to achieve

* In an interview with the Wall Street Journal, Mario Draghi’s support for the deal remains understated bordering on tepid: he suggested that the sceptical market response to Tuesday’s rescue deal suggested many doubted Athens would follow through on a promised austerity cure. “It’s hard to say if the crisis is over,” he warned.

* Commerzbank AG Chief Executive Martin Blessing yesterday said of the Brussels deal, “The participation in the haircut is as voluntary as a confession during the Spanish Inquisition”.

In summary:  If Greece does not default by March 20th, it will be an outright shock to A&G since so many major players in the secret contagion 'game' are working very hard behind the scenes to make sure it does happens.  The goal is to cut off the financial bleeding at Greece before spreading to bigger and more important nations that require too much funding to bail, and because many believe they will be insulated by any financial blowback, thus the potential for a financial tsunami turning into a ripple.   

We believe they are wrong on both accounts.

"Greece won't see a penny of bailout funds"

A really excellent article written in today's Telegraph UK about the ongoing farce of Greece selling its soul for a bailout that the rest of Europe really doesn't want to give them, nor thought a year ago the nation would be around to request it...

The full article written by an economist which is quite superb in its accuracy and understanding of the situation in the EU can be found here:

http://www.telegraph.co.uk/news/worldnews/europe/greece/9079430/Greece-wont-see-a-cent-of-the-great-bail-out.html

Here is a portion of the article from the Telegraph UK:

"Over the weekend, the Greek parliament voted to accept Europe’s latest demands for spending cuts and tax rises and other reforms and retrenchments. The aim was to make it marginally less implausible that Greece will pay back the hundreds of billions of euros that its neighbours are lending it. The alternative, we were told, was that it would become “ground zero” for a new financial meltdown, with its exit from the euro leading to social chaos within the country and economic chaos outside.

"So Greece’s MPs voted it through, 199 to 74 – despite the tens of thousands rioting on the streets of Athens, despite GDP having contracted for three years in a row, despite tax revenues collapsing thanks to austerity-induced depression and overt, systematic tax evasion, despite the main governing party’s popularity falling to 8 per cent in the opinion polls.

~ Beggar girl- Rhodes, Greece

"Now it won’t default or leave the single currency, and everything will go back to normal… won’t it? Almost certainly not. For a start, despite the vote yesterday, the Greeks probably won’t ever see a single cent of that second bail-out. The idea is that the eurozone will lend money to Greece, which it can use to pay off the banks holding its debt, as part of an agreement to save it from outright bankruptcy in March. But when the members of the single currency originally agreed to this second bail-out last year, Greece was not expected to last this long.

"In particular, the Slovakians, Finns, Austrians and Dutch would never have agreed to the deal if they had thought there was any chance of them actually having to pay. It was a political arrangement, spatchcocked together to force the International Monetary Fund to keep forking out for the initial bail-out. The Slovakians failed even to contribute to that first rescue package, so it was never credible that they had any intention of funding a second. The Finns have passed a law banning their government from giving any more money to Greece without collateral. The Austrians have enough trouble coping with the crisis in Hungary – to which their banks are heavily exposed – without sending money elsewhere; being downgraded by the credit ratings agencies hasn’t made them any keener to pay..."

"The truth is that Europe doesn’t want to pay – so despite all the drama in Athens, the Greeks will probably default outright in March anyway..."

~ And somehow the soulless know-it-all, piece of shit Rat investors who pushed the global markets up today based on Greece, do not understand this reality...or care to.

~ People walking past a beggar- Syntagma Square, Greece

Grecian Spring

Well the market is down today... -135pts as of 2:15p est..

Would be nice to see a four-digit decline; a '1' or '2' in front of that '135' but still, considering the Dow has been going up for all of 2012 without any rationale or reason beyond empty optimism and the Hunger to profit, we'll celebrate any triple digit down days.

Yesterday we demonstrated once again how deeply uninformed Americans are to the realities going on in Greece.  But as much as blame could be placed on the average person for not caring about anything or anyone outside of the immediate sphere of 'self',  it is also the fault of American media for intentionally doing a piss-poor job to accurately reporting on how troublesome the economic rots of the Eurozone are.

I guess media is incapable of serving corporate master and Truth equally.

Ultimately the economic and political demise of Greece will affect us all, so people better start paying attention to it as if it was local news or your favorite sports team, and not some profit-making nuisance or distant problem far, far away somewhere in the Mediterranean.

Here's some of the latest news and pieces of interest from Greece from today:

--  Greek Bailout "unagreed" 24 hrs after it was agreed upon.  The leader of the rightwing Popular Orthodox Rally (LAOS), Georgios Karatzaferis woke up to reality that the cuts would destroy what's left of Greece and pulled back support.  The Euro's value vs the Dollar plunges...  Their political party does not have enough votes in Parliament to derail the 25% reduction in minimum wage, 15,000 job cuts and other austerity sacrifices outright but let's just say their point of view is becoming more and more prevailing, especially as there's April elections to consider.

--  Greek Prime Minister Lucas Papademos has pledged to do "everything necessary" to rescue the €130bn bail-out package for Greece, and said that any senior members of Government who opposed him would be ousted.   Since at least 3 members of the coalition have resigned in protest, maybe ousters aren't necessary.

Isn't democracy just Wonderful?   Anyone who disagrees with your leadership or policy decisions, you simply 'oust'.  Of course Pamademos is a technocrat and wasn't elected by the people (he's simply a banker working for the EU and financial interests to ensure they get their money by all means necessary)

Papademos also said if Greece defaulted, there'd be 'uncontrolled chaos'.  Seems he forgot to finish the sentence... 'for the financial sector'.  And if there is chaos in Greece and the rest of the world, it will be due in large measure because the powers that be refused to make contingencies.  To the stubborn bastards who control global finance there never is nor was an Option B, so any chaos will be intentionally created to scare future debtors from defaulting.

-- Though more symbolic than reality, The Federation of Greek Police have threatened to arrest EU/IMF officials, accusing them, in a formal letter, of "...blackmail, covertly abolishing or eroding democracy and national sovereignty". They also wrote, ""Since you are continuing this destructive policy, we warn you that you cannot make us fight against our brothers. We refuse to stand against our parents, our brothers, our children or any citizen who protests and demands a change of policy."

There will come a point when the police stop fighting the protesters and join the struggle- then all bets are off, even across the Atlantic.  Hope you have some cash in a sock or something because your local bank will be on government-imposed 'holiday' for a few days to prevent a panic run.

The Greek situation also reminds me of the situation in Wisconsin last February involving that coward Governor Walker, who is in the pocket of the Tea Party controlled Koch Brothers.  He wanted to destroy the unions by making it illegal to collective bargain, so he targeted teachers, firefighters, everyday workers, etc..  The one union that was exempt from the law-- the police union.  That's what all third-world and third-rate leaders do- essentially bribe the police because without them, the leaders are powerless and emasculate.

Well now you're caught up to speed...

If you read this blog, we know you are informed and care.  But your friends... your family... your neighbors are still in a complete state of utter ignorance when it comes to the economic storm clouds coming from Greece and the rest of the Euro.   I could express a thousands analogies but I will only do one:

Due to globalization and banking interdependence, all the nations of the world are economically intertwined, like lights on a string.  When one bulb blows, it will affect all others, no matter how seemingly far away it appears on the string.

Random Musings- Greece, America & apathy

~ A pie chart breakdown of where Greece's bailout money goes.  Only 19 cents on the dollar, or rather euro actually go back to the Grecian economy i.e. its populace.

No one respects deadlines anymore...

Frustrating... just frustrating..

The big news out of Greece over the weekend was that its leaders had just 24 hours to work out a deal with its EU, ECB & IMF creditors that would complete the selling of their nation and souls to their creditors.

Only 24 hours for Greece's leaders to agree to "the minimum wage be cut to less than 600 euros ($790) a month ($4.94/hr) and that at least one holiday allowance, the so-called 13th and 14th wages, be abolished, and pensions paid by supplementary funds should be cut by 35 percent" (AP)

Just 24 hours to agree to this harsh austerity or Default.

And what happens??   Talks extended into Monday...

Not sure what there really is to talk about.  The choices are really like an evil person saying "We will cut your left and right arm off as well as your right foot, or we will kill you outright"   How much deliberation does one need on a choice like that?  When does the pride instinct kick in?

We've learned and observed many lessons over the past 39 months.  Among them is that few to no world leader truly cares about its people, especially in a crisis, and when the choice is between reality and can-kicking, everyone including the common people want it kicked.  Happily so.

Also learned that few people in the US have really been affected so far by this recession.  Most of the people hurt and harmed were those in such bad shape from policies of the last 30 years that even in economic boom, they'd be going bankrupt, foreclosed upon and all that.  Very few others have.

You walk in most malls.. still see it bustling.. still see plenty of vapid, anti-social, technology addicted teenage morons with their headphone buds in ears and texting away without a care in the world.. Still see plenty of consumers consuming with credit cards swiping and registers cha-chinging all the live long day.. Still see people emotionally oblivious to everything outside their immediate family and more immediate needs.

The biggest lesson learned with few exceptions is that in this whole global economy narrative of crumbling banks, bailouts, recession and supposed "recovery", from politicians to investors to everyday people, there really is no one to cheer or root for.  And so few heroes.

Politicians are corrupt, bankers/financiers are evil, Investors are vermin and most everyday people won't fight back in any meaningful way.  Could be apathy or a fear that god-forbid, all their 'stuff' will be taken from them.  And the youth- they have the most cause to fight since every 18yr old college student without a silver spoon or teat to suckle upon, becomes a debt slave via student loans before legally allowed to take their first drink.  And that debt never, ever, Ever go away... Even in a bankruptcy.

In other parts of the world, youth fight back, or at least try to.

Angry Youths Attack House Of Greek President Papoulias; Hurl Rocks, Molotov Cocktails (AP) -- "About 30- 50 Greek youths arrived by motorbike and on foot just after 8 p.m, hurled a Molotov cocktail, rocks and paint at the house but stopped short of attacking the two guards at the President’s house"

In America, they sit outside in parks for days and weeks on end sipping coffee from thermoses while listening to their ipods and texting nothing important while mainstream America ignores them.

Either we've become That lazy and detached a nation, or those suffering the most still believe so much in the whole Left-Right political canard that no one wants to embarrass or hurt Obama's chances at re-election with a sincere dust-up.   I can't imagine such restraint if McCain/Palin were running the nation with exact same economic policies or even say a Bush third-term.

So, deadline extended in Greece one more day.  We still assume all will be worked out to the powerful banking interests' will...  or who knows, be extended another day.

Greece is the nation that invented democracy.   Would be nice if they be less like Athens and more like Sparta.

When know-it-alls know nothing

~ "I'm tellin' ya.. you gotta' be in the market!  Buy lotta stocks.. ya Gotta!"

Don't know which I hate more- the stock market, those who invest in it or those who report on it.  Tough call- all equally dreadful and in the case of investors and media, both worthy of a face scratching.  The reasons we've stated too often to take time to repeat here.  Suffice it to say, if you're not part of the 1%, you should be wanting to sharpen your claws as well...

But as much as I despise these entities, they also make me laugh at times.  I tend to find it humorous when cocky cock know-it-alls think they have all the answers and can accurately predict economic events based on assumption that all will work out when push comes to shove, then are proven wrong.

Here's a headline from this morning:


Emerging Stocks Set for Biggest Monthly Gain in Three on Greece Optimism (Bloomberg) -- "Emerging-market stocks rose, with the benchmark index set for its largest monthly gain since October, after Greek Prime Minister Lucas Papademos said major progress has been made in debt-swap talks... he’s “strongly committed” to reaching a debt-swap accord with bondholders that is crucial to lowering Greece’s debt burden and freeing up another round of aid before the country faces a 14.5 billion-euro ($19 billion) bond payment on March 20."

And the market rejoiced and figuratively held hands as they danced around in the garden of eternal optimism and never-ending profit making...  La La La...

But then later in afternoon...

Greek officials attack EU and IMF as debt talks stall (Guardian.UK) -- "Greek officials launched a vociferous behind the scenes attack on European Union and International Monetary Fund negotiators as talks in Athens over the country's mounting debts appeared to stall... a crisis meeting of party leaders would be called as early as Thursday to thrash out a response to an increasingly intransigent negotiating team sent by Brussels, which is demanding severe austerity measures before sanctioning a further €130bn (£109bn) of bailout funds...


"On the negotiations over the bailout funds, Greek MPs have objected to demands by the troika for further wage cuts and reductions in the minimum wage.  The troika (European Union, International Monetary Fund & European Commonwealth Bank) doesn't appear to be willing to accept any concessions whatsoever on reducing the minimum wage and scrapping bonuses," said the government aide. "No political party is willing to move either, saying wage cuts are a red line they are simply not going to cross. You tell me how this is going to be resolved. We have no idea and we're very worried.""

A&G does not pretend to hide the fact we want this to fail and overall, desire Greece to do what it should have done two years ago... Default.

 "Meowww... hate investors & banks sooo much.. Meeeowww!! Rrrr Rrrrr"

Investors and banks have not had to take any real financial hit or punishment since the global economic crisis began with Lehman Bros in Oct, 2008. That is now 39 months.  Its about time they did..  Its about time the ultra-wealthy around the world who do nothing but create misery in populaces then financially profit from it, hemorrhage Severe losses and feel real pain.

Unfortunately the way this game has been played for over 3 years, there's always some magic trick or scheme or compromise pulled from thin air (or someone's ass) to keep all the plates spinning so no one at the top financial echelon ever feels any economic pain.   So we're realistic to the probability that all will work itself out for the bankers and the Investors will continue to rejoice and 'dance'.

But Lord knows, we are not hoping for it.

And if Greece sells all of its soul to the banks, well there's always a ray of hope that the Portuguese wont.. or the Irish... or the Italians.. or the Spanish..

How a nation prostitutes itself...

~ A Brothel in Ancient Greece

What is the worst thing a person can sell for money?

Usually one's body is the worst, just slightly above one's soul.

And the worst thing a nation can sell short of their soul i.e. autonomy?

Greece's ancient sites to play starring role in recovery  (GuardianUK.co) --  "Archaeological treasures including the Acropolis and the temple of Delphi will be available as backdrops for filming and photographic shoots for as little as €1,600 (£1,339) a day... The debt-choked nation has taken the dramatic step of deciding to exploit some of its past majesty by utilising the Acropolis and other antiquities – cultural gems until now considered too sacred to besmirch with commerce...

"The move follows intense pressure from the European Union and IMF, the foreign lenders keeping the nation afloat. With fears of Greece defaulting on its debt mounting by the day, EU officials stepped in saying the time had come for its cultural treasures to be put to work"

Did you get that folks?  Its not that Greece wishes to do this... its the Worthless EU and by extension, the money-hungry US led IMF loan sharks pressuring the nation's government's historical antiquities "to be put to work".

Maybe its just me but reading that, I had this visual in my mind of a Bastard piece of shit 'pimp' stepfather forcing his wife to put her young daughter on the street to whore to contribute to the family income.

Can't hide it folks- that's what I think of the EU and IMF... You should too..

Greece.. Grecian people..  How much are you going to take?

Keep some pride and national autonomy... Default already!!

Basic 101: Derivatives and Credit-Default Swaps

I wanted to use this posting to explain the terms 'derivatives' and 'credit default swaps' (CDS) in the most easy to understand manner possible and connect them to what's going on in Greece so people can really understand what the terms mean and what's going on currently in the news.  But rather than write like a dry economics textbook  and put the reader to sleep, I will do my best to explain using real-world everyday examples.

Let's start with derivatives.  The best way to explain what they are is to take you with me on a magic trip to a casino, specifically the roulette table.  If you're not familiar with roulette and how you bet, etc, hopefully you can still follow along and understand.

The picture above shows what the roulette table looks like.  You can bet on anything- whether the ball on the roulette wheel will land on a specific number, odd or even, black or red and so forth..

Let us say for this example you take $50 in chips and place on the 'Even' box.  This means if the ball lands on an even number between 2-36, you win, if its Odd, you lose.. BUT..your odds are not 50-50.  There are two other numbers on the wheel, 0 and 00 and if the ball lands on either, you will lose your $50

So what do you do to prevent the possibility of the ball landing on 0 or 00 and losing your $50?  You 'hedge' your bet so as to minimize your potential losses.  If you were to place a $10 chip on the 0 and 00 boxes separately, you've just created two derivatives i.e. insurance bets.

Now you're still open to risk because the roulette wheel's spin can land on an Odd number and you lose everything, but the risk has been minimized.  Now usually those entities that engage in derivatives make sure they're protected as much as possible.

So using this example, say you placed a $10 chip on 'Odd' as well, then you have all scenarios covered- 'Even', 'Odd' and 0 & 00.  Your chance at a big payday is greatly minimized but if you were in roulette for the long term, and not just 3-4 spins, then its a safe way to bet and gradually make money.  

Banks and financial  entities are not in the investing game for the short term. They are constantly investing and as long as nothing puts them at risk of a Lehman Bros-type collapse, they will continue wheeling & dealing, and using derivatives as stopgaps against big losses.

Now that you understand what basically derivatives are, let's focus our attention on credit default swaps (CDS).

In this example, we have 4 people- Amy, Beth, Cindy and Dara.

Amy needs money badly so she borrows $500 from Beth at high interest.  Beth lent it to Amy because the profit potential at high interest was too great to pass up, but she really doesn't have a lot of faith she'll get her $$ back.  So Beth contacts Cindy.

Cindy says to Beth for a $25 fee she will insure the loan so that if Amy defaults, she will pay whatever portion of the $500 + interest wasn't repaid if Amy stops paying Beth.  So for the nominal fee, Beth feels secure she'll get all her money back no matter what and at this point it doesn't matter Who the money comes from.  Cindy is acting as an insurance agent.

Now Dara believes Amy will never repay so she wants to get in on the action.  She is a speculator.  Dara also pays Cindy $25 because if Amy defaults, Cindy will be now responsible to two people, Beth and Dara, to cover the portion of the original $500 loan + interest which Amy stops paying.

So here's where it gets tricky...

If Amy pays on time and Beth gets her money back, then Cindy profited $50 while Dara lost her $$ on a speculation bet.  BUT- if Amy stops paying after let's say $100, then Cindy is on the hook for $400 + interest to Beth and Dara EACH!

Oh yes- I forgot, Cindy only has $300 in her life savings so there's absolutely No way she will be able to make good on the insurance to both Beth and Dara.  She only offered the CDS as a means to get quick money and never imagined she'd have to cover the loan!

So Cindy is now forced to 'loan' Amy the $$ she needs to pay Beth even if Amy never repays her back, so as to not trigger the CDS making Cindy on the hook to repay both Beth And Dara, the speculator, which Cindy is in no position to do.
_____________

Now let's tie this all into what's currently going on in Greece.

Investors purchased Greek bonds or 'debt' at high interest rates because Greece's credit rating was so poor.  Because they felt a bit insecure as to what happens if Greece stops paying i.e. default, investors made hedge bets in the form of CDS to banks and financial institutions in Europe who received money at this point for doing nothing but giving assurances to insure the Greek debt so investors would not take a loss or 'haircut'

If Greece pays their debts, the banks keep the money with no losses.

If/when Greece defaults, it means the CDS trigger in... this means they have to pay back the difference of the billions in euros the Greeks defaulted on, not only to the investors, but also speculators who do not directly hold Greek debt but still got in on the action to bet on Greece's default.

Now the European financial institutions thought to themselves, "Maybe we've over-extended ourselves with all these CDS".  So they made insurance bets or sold derivatives to US banks and financials so that if Greece did default, it would somewhat minimize their losses because these US banks would have to pick up the difference.

This exposed US banks and financial institutions to risk from Greek default while keeping 100% of the money if Greece pays their debts.

So basically what's happened is this-  Greece is pretty much insolvent.  It needs more loans to keep making its payments to the investors who hold its debt.  The money is lent by the IMF and ECB not because they expect Greece to pay them back.  Its because its more financially beneficial to give Greece 100 billion euro, let's say, then to have to pay out trillions of euro in CDS to all the investors and speculators upon a default.

I hope this helps people understand what's going on with Greece, the Eurozone, the US and why everyone is so scared of Greece defaulting even though realistically the nation has no chance to survive on its own, and this everyone is in a great quandry.

Another IMF disgrace

~ "De women find de pipe intoxicating, no?" - Dominique Strauss-Kahn

The big news of the weekend which every major media source has reported is that Dominique Strauss-Kahn, head of the International Monetary Fund (IMF), has been arrested on charges he allegedly forced a hotel cleaning woman onto his bed and sexually assaulted her early afternoon Saturday, then was taken into custody that evening before his plane departed for Paris.

According to Reuters, "She told detectives he came out of the bathroom naked, ran down a hallway to the foyer where she was, pulled her into a bedroom and began to sexually assault her... She pulled away from him and he dragged her down a hallway into the bathroom where he engaged in a criminal sexual act... He (then) tried to lock her into the hotel room,"

Its a juicy story with salacious details obviously but what makes the story important isn't in the sexual aspects but in the fact that Strauss-Kahn held ambitions to run for France's presidency and was a leading contender of the French Socialist Party.  This political aspiration seems to be now derailed.

Most importantly as far as 'A&G' is concerned is the fact this vile man (In October 2008, he apologized for "an error of judgment" for an affair with a female IMF economist who was his subordinate) is head of the IMF, in itself a Most despicable organization that destroys whole nations by acting as the worst kind of loan shark or Mafioso, lending money when a nation has no where to turn.

Once the money is lent, the IMF then immerses itself in the governance and economic decision making policies of such nations, and forces through harsh austerity which cause endless economic pain and suffering upon the populaces for generations. In the process, the IMF collects its pounds of economic "flesh" from these fiscally struggling nations and all the Investors who get paid 100 cents on the dollar on their investments on national debts instead of taking 'haircuts', are happy cockroaches.

Ask the people Greece, Ireland & Portugal how they are liking the IMF...

There is an irony of sorts that the head of the IMF was arrested and may face imprisonment for raping a hotel cleaning woman, yet the IMF itself pretty much rapes the nations they lend to and yet there's no entity powerful enough to stop them.

Here are some facts about the IMF you may not know...

--  It came into existence in December 1945 when 29 countries came together and signed an agreement with a goal to stabilize exchange rates and assist the reconstruction of the world's international payment system.  Today 187 countries are members and headquarters are located in Washington, D.C.

--  The US has by far the largest share of votes (approx. 17%) amongst IMF members. Japan is second largest with 6.01% share of votes.  The seven largest industrialized countries (G-7) hold a total of 45% share of votes.  

-- Major decisions require an 85% supermajority. The US has always been the only country able to block a supermajority on its own due to the 17% share in voting.

--  The US contributes about 20% of the total annual IMF budget.  So for instance, when Greece received a $40 billion bailout from the IMF in May, 2010, approximately $8 billion came from US taxpayers.  Yet when any of the loan gets repaid back to IMF, the taxpayers don't receive a penny.

~ So, in essence while the US does not "run" the IMF directly, it makes sure the financial body never goes against US economic or political interests, and has the final say on all important decisions due to its 17% supermajority vote.

The most unfortunate aspect of this incident isn't so much what happens to Dominique Strauss-Kahn.  Its that no matter what, IMF will be insulated and continue running 'business as usual', as it rapes nations of their wealth and sovereignty.

Video: Ireland & Austerity

There are many financial problems plaguing the European continent and most if not all those maladies are caused by European and International banks who overreached up until 2008, took massive economic hits when the global economy crashed, then held various nations hostage until their governments agreed to surrender national economic autonomy and allow those financial institutions to pretty much rape and pillage the European populaces through austerity.  

While one could study Greece to get a taste of what happens when banks devastate a nation, I feel a more comprehensive understanding of this Investor-driven plague can be found by studying Ireland, a nation that is similar to Greece in that both nations' economies are Heavily dependent on imports and both have taken IMF loans within the last year.  But whereas Greece holds strikes and protests almost daily, the Irish people are still in a form of shell-shock as to what's hit the nation. 

Below is a very informative video in 2 parts from Max Keiser who when it comes to finance, markets and understanding the global ponzi scheme currently going on, is someone whose opinions I respect. He explains how Ireland's economy was decimated back in 2008, the 'deal with the devil' their government agreed to with the IMF by accepting their loans, and what's ahead for Ireland and her people.

Please watch & understand this is not isolated to the Emerald Isle..  Enjoy~

Ireland- part 1 (10min approx)

Ireland part 2 (10min approx.)

IMF: Age of America Nears End

~ "Four F**k-Ups and a Good, Decent man"

I'm reposting a news article from MarketWatch.com because of its importance in understand America's place in the global economy, and what has happened not simply since the start of the recession, but really over a 30 year period beginning with the original "F**k Up", Ronald Reagan's "Trickle Down" economic policies...

(MarketWatch article in blue font)

"International Monetary Fund has just dropped a bombshell, and nobody noticed.


For the first time, the international organization has set a date for the moment when the “Age of America” will end and the U.S. economy will be overtaken by that of China. 


And it’s a lot closer than you may think.


According to the latest IMF official forecasts, China’s economy will surpass that of America in real terms in 2016 — just five years from now... It provides a painful context for the budget wrangling taking place in Washington, D.C., right now. 


It raises enormous questions about what the international security system is going to look like in just a handful of years. And it casts a deepening cloud over both the U.S. dollar and the giant Treasury market, which have been propped up for decades by their privileged status as the liabilities of the world’s hegemonic power.


According to the IMF forecast, whomever is elected U.S. president next year — Obama? Mitt Romney? Donald Trump? — will be the last to preside over the world’s largest economy.


Most people aren’t prepared for this. They aren’t even aware it’s that close. Listen to experts of various stripes, and they will tell you this moment is decades away. The most bearish will put the figure in the mid-2020s. 


But they’re miscounting. They’re only comparing the gross domestic products of the two countries using current exchange rates.


That’s a largely meaningless comparison in real terms. Exchange rates change quickly. And China’s exchange rates are phony. China artificially undervalues its currency, the renminbi, through massive intervention in the markets.


The comparison that really matters:  The IMF in its analysis looks beyond exchange rates to the true, real terms picture of the economies using “purchasing power parities.” (PPP) That compares what people earn and spend in real terms in their domestic economies.


Under PPP, the Chinese economy will expand from $11.2 trillion this year to $19 trillion in 2016. Meanwhile the size of the U.S. economy will rise from $15.2 trillion to $18.8 trillion. That would take America’s share of the world output down to 17.7%, the lowest in modern times. China’s would reach 18%, and rising.


Just 10 years ago, the U.S. economy was three times the size of China’s. "

Ineptitude of both political parties over 30 years, as well as selfish greed which is as natural to businesses and corporations as breathing, have caused this to happen.  More specifically, the only real differences between Republican and Democrat in political circles has been on social and hot-button issues like abortion, gay-rights, 2nd Amendment rights, etc..

Economically, there are little to no difference.

Sure the Republicans talk of balancing budgets now but their goal really is to completely gut social services and roll back the entitlements of the last 75 years.  They had no problems freely spending money when in control of Congress during the early-mid 2000's.  And Democrats claim they're for the working people and poor, yet abandon them at every turn so not to upset the markets, corporations and power brokers that own both parties.

And meanwhile, while every President from Reagan to Clinton to Obama was/is at heart, a pro-Wall Street, pro-corporation "Trickle down"-ite, deeply greedy US businesses decided it was far better for them to close whole factories and distribution centers and ship them to the ends of the globe to save $$ in wages, benefits and Federal taxes.

The American only had value as a 'consumer' with endless credit cards to tap out which was used by most people to make up the difference in loss of standard of living, based on increased prices and stagnant wages.

The American people have not had a leader who has genuinely fought for them in over 30 years; someone who looked at corporations and banks with healthy hatred and took them on directly, grabbing the proverbial 'bull' by the horns.  Someone who fought hard for fair trade policies that help make the nation stronger rather than speed up its decline.

Instead, for 30 years our Presidents have made us feel good about ourselves with "Morning in America", sold us on a 'New World Order', 'felt our pain' while increasing it via NAFTA & WTO, sold a bill of lies to get us into a 8years + counting war in Iraq, and promised us 'Hope' & 'Change' while delivering neither.

Five presidents worked collectively to appease the ultra-rich,  destroy the economic foundations, expand our National Debt to uncontrollable proportions and make us heavy indebtors to China, who will now eventually surpass the US in five years.

I end with this sobering statistic-- in 1980, the National Debt of the US was under $1 Trillion.  In 31 years and five really awful presidents of both parties, it is at $14.3 Trillion and rising by $133 million A DAY.

You Know You Are In Trouble When Supersizing A Backup Rescue Facility By Half A Trillion $ Isn´t Enough 4 Month After The Introduction....IMF Version

In April i wrote at the beginning of the Greece / € Crisis

No wonder the IMF has just SuperzisedTheir "Backup Rescue Facility" By Half A Trillion ( no typo ) for "Contribution To Global Financial Stability"......

Im April im Angesicht der Griechenland und € Krise schrieb ich

Kein Wunder das "vorsorglich" der IMF die Mittel zur "Stabilisierung" der Sorgenkinder mal eben still und heimlich auf 500 Mrd $ verzehnfacht hat ( kein Tipfehler )....

Fast forward to August...... I´m not sure how credible the 1 trillion $ number is but the fact that the IMF is implementing / modifying another credit facility on top of all the existing ones does at least raise eyebrows..... Looks like even "Shock & Awe" isn´t able to stop the flooding.....

Hat ja immerhin einige Monate gereicht...... Ich habe keine Ahnung wie "belastbar" die genannte Summe von 1 Billion $ für die neuen "Rettungsschirme ist....Wenn man aber bedenkt das bereits wenige Monate nach dem letzten Programm bereits wieder Bedarf an neuen Rettungsschirmen besteht muß man befürchten das besonders im Hinblick auf die Zukunft diese Summe nicht zu hoch gegriffen ist....Schon erstaunlich das selbst diese "aberwitzigen Summen" anscheinend nicht mehr ausreichen zumindest mittelfristig die ständig größer werdenden Problemzonen zu überdecken.....

IMF Changes, Expands Crisis-Prevention Credit Lines Bloomberg

Talks are ongoing with member countries to raise the IMF lending capacity to $1 trillion as part of G-20 discussions.

John Lipsky, IMF first deputy managing director, told reporters on a conference call today that the institution has enough money to fund the new credit lines. At the same time, he said he is confident that member countries will continue to demonstrate a commitment for the IMF to have the resources to make the new credit lines “credible and usable.”

IMF Eliminates Borrowing Cap On Rescue Facility In Anticipation Of Europe Crisis 2.0; US Prepares To Print Fresh Trillions In "Rescue" Linen ZH

today the IMF announced it "expanded and enhanced its lending tools to help contain the occurrence of financial crises." As a result, the IMF has as of today extended the duration of its existing Flexible Credit Line (FCL) to two years, concurrently removing the borrowing cap on this facility, which previously stood at 1000 percent of a member’s IMF quota, in essence making the FCL a limitless credit facility, to be used to rescue whomever, at the sole discretion of the IMF's overlords.

Additionally, as the FCL has some make believe acceptance criteria (and with countries such as Poland, Columbia, and Mexico having had access to it, these must certainly be sky high), the IMF is introducing a brand new credit facility, the Precautionary Credit Line (PCL), which will be geared for members with "sound policies [which just happen to need an unlimited source of rescue funding] who nevertheless may not meet the FCL’s high qualification requirements." In other words everyone.

Lastly, for those lazy readers who always scroll to the very bottom looking for a video clip summarizing all previously said, you are in luck. Here is the IMF's Reza Moghadam condescending, and blatantly lying to all who care, as to what the purpose of tonight's "Crisis Prevention Toolkit" expansion is.

IMF Expands Loan Options to Developing Countries WSJ

WASHINGTON—The International Monetary Fund said Monday it would broaden the kinds of loans it offers to encourage a large swath of developing countries to get financial help before they are engulfed in crisis.

Under a new "precautionary credit line," the IMF said it would lend a substantial amount of money to countries whose policies it generally endorses, before those nations run into trouble. The loan would operate like a line of credit, so a country wouldn't have to use the money, and rack up interest charges, unless it needed the financing.

The program would offer loans of as much as five times a country's quota, meaning its financial stake in the IMF, with the possibility of doubling that after a year. Indonesia, for instance, has a $3.1 billion quota, so it could be eligible for a credit line of up to $31 billion. ....

The IMF is working on yet another new loan, the "global stabilization mechanism," which would be available for groups of countries, as a way to overcome the stigma of borrowing from the IMF. The IMF is even considering approving countries for such loans without them having to apply for the money.

Among issues still being debated is whether to simply allow existing credit lines to be more broadly deployed or come up with a new facility that would provide short-term liquidity, he said.

The IMF devises a new way to lend to vulnerable countries before they suffer from financial crises Economist

IMF Sees G7 Net Debt At 200% Of GDP By 2030; 441% By 2050 ZH

Got GOLD ? ;-)

Glitch In The Matrix......

The "Wall Of Worry" is getting steeper...... Should the spreads remain elevated even after Greece has ""activated" the EU/IMF rescue package i think we could see the VIX spike to over 17.... ;-)

"Schockierend" .... ;-) Sollten jetzt selbst nach Aktivierung des EU/IMF Programmes die Auschläge nicht "merklich"sinken dürften mit hoher Wahrscheinlichkeit die nächste Stufe der Krise gezündet werden....

The Greek debt merry-go-round goes round again FT Alphaville

The 10-year Greek bond – German bund spread widened to 426 basis points on Thursday.

That’s up from 406bps on Wednesday — and nearing an 11-year high

Keep in mind that the bailouts are not to rescue Greece ( see Foreigners Holding 75 % of Greece’s Current Debt Stock & Bank Exposure To PIIGS / Chart ) .....

With everybody "Too Small To Fail" the prospects for a "GOLD-BUG" could be worse... ;-)

Nur zur Erinnerung, die teilweise wahnwitzigen Konstruktionen sind nur auf den ersten Blick zur Rettung der Griechen gedacht ( siehe Foreigners Holding 75 % of Greece’s Current Debt Stock & Bank Exposure To PIIGS / Chart ) ....

Da inzwischen weltweit die oberste Maxime selbst bei aussichtslosen Fällen "Too Small to Fail" ist dürften sich auf absehbare Zeit die Aussichten für einen "GOLD-BUG" nicht gerade verschlechtern....;-)

UPDATE: Fixing the Matrix........

IMF Prepares For Global Cataclysm, Expands Backup Rescue Facility By Half A Trillion For "Contribution To Global Financial Stability" ZH



EXTEND & PRETEND .......