Greek Debt Deal Done—Yeah Right

Greek Debt DealBy Greg Hunter’s USAWatchdog.com 

I keep asking myself, when is a deal not a deal?  Every time I hear the words “Greek debt deal” or “Greek bailout” in the same sentence, I wonder if, this time, they really have a deal.  Yesterday, I was thinking that again when it was announced there was a new Greek debt deal.  The headline from Reuters read, “Europe seals new Greek bailout but doubts remain.”  My favorite paragraph in the story said, “An opinion poll taken just before the Brussels deal showed that support for the two mainstream parties backing the rescue had fallen to an all-time low while leftist, anti-bailout parties showed gains.  Anastasis Chrisopoulos, a 31-year-old Athens taxi driver, saw no reason to cheer the deal.  “So what?” he asked. “Things will only get worse. We have reached a point where we’re trying to figure out how to survive just the next day, let alone the next 10 days, the next month, the next year.”  (Click here for the complete Reuters story.)  There are elections in Greece in April.  What do you bet one of the “anti-bailout parties” wins?  There may be a deal today, but not in the not-so-distant future.

Another headline read, “Greece secures bailout to avoid debt default.”   Why should headlines be so misleading and give false hope?  Buried in the story was this nugget, “But despite those unprecedented efforts, it was clear that Greece, which kicked off Europe’s debt crisis two years ago, was at the very best starting on a long and painful road to recovery. At the worst, the new program would push the country even deeper into recession and see it default on its debts further down the line.”  (Click here for the complete story from MyWay.com.)   The headline should have read, “Greece secures bailout to avoid debt default for now.”

Let’s be frank here, Greece is going to default.  In the end, it will be the best choice–not for the bankers but for the people.  The bailout is really more debt put on the backs of the Greeks to help the bankers who made very bad loans.  You want to see what I call a true headline that tells the real story?  It comes from Graham Summers of Phoenix Capital.  It says, “Greece Is Not Lehman 2.0 as I’ll Show You, Its Far Far Worse.”   Now, that’s a headline you will not see on the mainstream media, but in this case, it’s probably a much better analysis of what is really going on.  Summers says, “In plain terms, Greece racked up too big of a tab and simply doesn’t have the means of paying it. End of story. The world needs to realize this. Because Greece will default and it will default in a big way.”  (Click here to read the complete post from Mr. Summers.  It’s sort of a sales pitch, too, but the report is valid.) 

I also think Greece will default.  When that happens, it will not be pretty for European or American banks.  You see, European banks hold a lot of these sovereign bonds, and American banks sold insurance in the tens of trillions of dollars thinking no sovereign country would ever default.  They would just raise taxes and pay the bondholders.  This gives new meaning to the phrase “you can’t get blood out of a stone,” which basically means you cannot extract what isn’t there to begin with.

Big American banks may be too big to fail no matter how badly they behave, but Ellen Brown from Webofdebt.com thinks some U.S. banks may, also, have too much exposure to save.  In her latest post, Brown lays out the case that a Greek default could take down Wall Street.  Brown said, “. . .there is one bit of bad behavior that Uncle Sam himself does not have the funds to underwrite: the $32 trillion market in credit default swaps (CDS).  Thirty-two trillion dollars is more than twice the U.S. GDP and more than twice the national debt.”  (Click here for the complete post from Webofdebt.com.) 

It amazes me how a country the size of Greece (with less than .5% of the global GDP) can be so frightful to the global economy.  What would a sovereign debt default in Italy (8th biggest economy on the planet) do to the world economy?  That’s probably coming, too, but not until the game is over in Greece.

Comments
  1. This guy

    I hear that Anonymous is stepping into the Greek fray and threatening to wipe Greece’s debt clean unless the IMF backs off and the unelected govt gets out. Thoughts?

    • Greg

      This guy,
      I hope Anonymous does this for all the PIIGS. That’s what is really needed–a complete debt wipe out, and we just might get it anyway.
      Greg

  2. Steve

    In my reading yesterday, Greece plans to default on March 21. WOW, all these meetings, votes and “theater” for nothing.

  3. Alan

    Blythe Masters JP Morgan comes to mind on these CDS and the next big scandal will be the Carbon Trading and who is heading up these Blythe Maters.

    This was a very good report on Channel4 news Yanis Varoufakis http://goo.gl/UZeif

  4. Sean

    Hi Greg, great stuff. Thanks so much for the excellent info you’re providing to your readers! There are precious few websites that are placing real US and world events into honest perspective – connecting the dots etc. You do a good job in pulling some of the better relevant material into a single view so that people can get a broader picture.

    On the domestic US front, there are a few interesting ongoing developments at the state level. Nearly 25% of states are currently moving to make gold and silver legal currency for transactions. Additionally, four states (so far) have introduced legislation that make it illegal to support unconstitutional NDAA activities.

    There’s a lack of trust in the federal government on both the security and economic level. I have some links below, followed by some brief personal analysis on why state officials are being pushed into making these decisions.

    http://www.thenewamerican.com/usnews/constitution/10916-virginia-house-passes-ndaa-nullifying-bill-other-states-join-fight
    Evidence of this laudable resistance to federal tyranny was most recently found in the Old Dominion, where on February 14 an impressive majority (96 out of 100 members) of the Virginia House of Delegates passed HB 1160, a bill that prohibits agents of the state government from “assisting an agency of the armed forces of the United States in the conduct of the investigation, prosecution, or detention of a citizen in violation of the United States Constitution, the Constitution of Virginia, or any Virginia law or regulation.”

    http://www.dailymail.co.uk/news/article-2103977/Politicians-losing-faith-strength-dollar-propose-make-gold-silver-legal-currency.html#ixzz1n7wfjCd8
    U.S. politicians are rapidly losing faith in the dollar, with more than a dozen states proposing legislation to legalise (sic) gold and silver as a currency.

    When reviewed together, these stories offer an interesting perspective on how state officials and their constituents are seriously disenchanted by US federal activities. It begs a few questions:

    What does it mean when states draft and approve legislation that is intentionally designed to counter federal legislation? Are there state plans in place to act upon these new state laws when challenged by the federal government? Do you think that legislators would approve these bills without having considered the potential challenges and various permutations of responses to types of challenges?

    There are more questions, of course, but these should get some minds working and maybe lead to a second line of questioning: Did this response occur to the analysts and planners who designed our federal domestic economic and security policies? These analysts who come to the table and work in teams for months or years on these bills are the best of the best. They’re MBA’s from top schools who are working structured risk management approaches to planning development. They utilize fishbone brainstorming techniques to associate upstream and downstream impact at both the federal and state level. They compile these various risk, association, and impact results and work on mitigating eventualities and potential fallout within the scope, context, implementation, and presentation of the associated bills. That’s how we do it in private industry in a project management environment. And I’m the chaff that falls between the cracks and ends up serving industry; not the cream of the crop who move into policy creation roles. So I have no doubt that these processes are implemented and followed when developing these bills.

    Which leads to my next question: Was alienation of state legislatures NOT considered as a managed risk item when bills that shape domestic security and economy were rolled out? I highly doubt it. Regular folks like us who read blogs like this saw the writing on the wall from the moment that we heard of these various unConstitutional or corrupt (or both) economic and security schemes. You can be very sure that the drafters of current policy saw the same writing long before we did.

    I’ve gone long here so I won’t finish my overall thoughts buy you’re smart enough to finish it on your own. Why would federal policy be implemented that forces states to be at odds with the federal government? If the controllers of US policy were dedicated to drawing the US into a global economic system under regional central banks (like the EU) would that be easier with a consolidated USA, or, would it be easier with a USA that has broken itself up to separate from an out of control federal government?

    Just think about that for a while. Hindsight is 20:20 and I’m now wondering if the NDAA was ever intended to be fully implemented. Considering that a huge percentage of military leadership is against it, it’s starting to look more like a wedge than a hammer.

    • Denarius

      Thanks for your views from a different perspective, Sean. However, you
      may be making a common error in assuming that THEY think anything
      like we do. That could only be true if we also are criminal psychopaths
      intent on total control of everything and everyone. I suspect we are not.
      —————–
      Ever since the several states began taking back their rights over currency
      and domestic security issues, I have had the notion that this could only
      lead to armed conflict. Consider the ugly scenario of Federal Troops firing
      on State Militia. American Civil War II? Is that a finish to your thoughts?

      • norcar survivor

        States don’t have rights, only accounts. Every state has federal dollars held over their head that would never dream of losing. I feel fairly confident that the Federal Government has an arsenal that will keep the states in line just as it does the citizens. Buck the system long enough and you get a visit from the IRS and they have the ability to create anything they want from thin air and MAKE you spend your life and fortune defending yourself, even when you did nothing wrong simply because you are guilty before proven innocent. The feds will use these same strong arm treatments against the states. We have endowed the Federal Government with too much power and that is where change has to start, not the states.

  5. AndyB

    The worst part of this latest proposal is that all disbursed funds will effectively bail out banks with absolutely nothing for the Greek people. But the MSM is carefully omitting this fact. Just another example of media corruption, disinformation, and propaganda.

  6. Diane Carol Mark

    Greg,
    The only reason Greece is so exposing to the global financial community as I understand it from reading Jim Sinclair’s site, yours and Martin Armstrong, is that the major banks are all highly leveraged having sold CDS insurance to protect against a default. With a default call, they’d all have to pay up. Jim points to an international committee comprised of reps from these banks as the key decision maker on whether or not an event is deemed a default. For now, to protect themselves (the banks), they’re not calling “normal defaults” as such. But, eventually, a default will be called. In the meantime, why would folks continue to buy CDS’s if the sellers won’t pay up? Guess they won’t going forward. Still, as you and others have pointed out, there’s a lot of CDS’s out there to be handled.
    :) Diane

    • Greg

      Diane Carol Mark,
      You haven’t commented for awhile. Happy to have your input!
      Greg

      • Liquid Motion

        I’ve read JS view on the ISDA too….seems pretty clear and logical.
        What is not clear though, is if there is a CRA call on a “default”.
        What’s the difference btw a technical and actual default.
        Surely if the likes of one of those majors calls a default then wont the ISDA have to come into line ?
        oooooops , I gotta change my trousers, wet patch…..!
        Enter stage left Mr Von Mises….and his crack up boom.
        Round of applause…..L & G.

  7. George

    IMHO, Greece is the catalysis that will grease the skids for the next collapse. Pun intended.

  8. Nathan

    Didn’t the one time audit of the Federal Reserve prove (Thanks to Bernie Saunders and Ron Paul) that the Federal Reserve actually bailed out to the tune of 16 trillion (5 trillion of which went to the ECB) It wasn’t called a bailout though it was a loan that the ECB could do with which it pleases . (This was a week after Helicopter Ben said he WOULD NOT bail out Europe)We’re not going to let Greece fail . I believe its Citibank and Bank of America that have HUGE exposure to Greek Debt . They’ll devalue the dollar Zimbabwe style before our banks feel any pain .

    Just another tidbit : I just read an article that Italy is “privatizing” its light houses . Amazing how the International banksters cause a crises , throw in one of their own (without elections) then sell lighthouses and ports and island to their chronies for pennies on the dollar . Portugal is next for the Eurocrises then it will swing to Italy and Spain after making a brief stop in Ireland . This cycle has been happening for two years now .

    Thanks
    keep up the GREAT work Greg .

    • Greg

      Nathan,
      Thew Fed should be audited on a regular basis if it is going to function honestly. Thanks for the comment.
      Greg

      • Liquid Motion

        The words “FED” and “honestly” are not allowed to be used in the same sentence.

  9. Art Barnes

    Greg, G. Summers also said this in his article “You cannot solve a debt problem with more debt 2) Austerity measures slow economic growth which in turn makes it harder to meet debt payments.” I regard the poor taxi comments as more believable than the big shot economic thinkers who are making the “deal”, at least the taxi driver understands that it may only work in theory, not on the ground. I could name you off the top of my head 50 things that only work in theory, not in real time with real humans. The fact is that theory is based upon all know factors being realized as theorized, very problematic at best, especially in economics. But as long as old Bernanke and the other great thinkers believe that gold is not money, that money is only fiat paper which I and I alone can print, your going to have those people coming in with more paper fiat “deals” every year or so and claim the crisis is over.

  10. Baja Bryan

    Greg,

    I keep asking myself the same questions you are asking yourself. Make no mistake, the fat lady is warming up her voice and about to take the stage for what may well be the loudest sad song in world economic history.

  11. chiller

    A Greek default will be no worse than what they are going through now, not to mention all of the lost credibility of the flailing Eeeuuuwww continually claiming to have fixed the problem, and never have or ever will. If they can’t save the smallest piglet, there’s no chance of saving any of them and once this reality sets in, their bond bubble will detonate like a 4th of July celebration. I for one anxiously await seeing all the corrupt financial webs of deceit twist, tangle and die a death from which none of them ever return. Everyone must remember all of the players in this historic time so they may be tried and convicted.

  12. g. johnson

    i am beginning to think that there may be something to the georgia guidestones after all. i mean…. could these people really be screw-ups of this magnitude? or has all this been meticulously calculated?

    http://www.radioliberty.com/stones.htm

    well, i guess we just sit on our thumbs and wait to see what happens next eh?

    • jay

      G johnson thanks for your posting. Interesting.

    • xxxxx

      The earth is a spaceship, all ships have a load limit. PEACE

  13. Hector

    “Let’s be frank here, Greece is going to default.  In the end, it will be the best choice–not for the bankers but for the people”

    I don’t know how life IS in Greece but I would like to know how it WAS before the crisis, I mean: how many hours did the average Greek worker rank in a week, did everyone have universal health care coverage, how many members of a given household worked to bring home the bacon (avrg), did they have strong unions, what was the retirement age??? I want to feel bad and relate, but truth is I don’t enjoy such perks here in Orange County,CA. I’m a truck driver working 10-14 hour days, 6 days, 70 hrs a week earning an average of $15/hr with a 1099 and I consider myself lucky. Granted, I see what the federal reserve does and what these bankers do, but it just sounds like the Greeks got a credit card offer in the mail, didn’t read the fine print, went to Vegas and now simply don’t want to pay the bill. In short they elected and reelected representatives that would give them what they wanted, got into massive debt because of it, and expect the federal goverment to save them while still wanting a high speed train….. and that’s why California deserves what its getting.

    Wait….what? Oops

    • MasterLuke

      Everyone seems to want free handouts in this world. Yet nothing is free. I think that is the theme of this tragic play. No-one wants to lose.

    • Denarius

      No “oops” about it, Hector, that’s exactly what I was thinking.
      Caliphoneyah’s former Govenator said right in front of the TV cameras,
      “Somehow we’ve got to learn not to spend money we don’t have.”
      Out of the mouths of politicians rarely spew words of truth.

      Wait . . . truth? Oops.

  14. mark

    Hi Greg,
    Thanks again for your consistently fine efforts in staying on top of the really important events that will determine the conditions of life in todays modern (financialized)civilization.
    While reading your post, I a was reminded of Jim Sinclair’s most recent and very sobering interview on the Ellismoneyreport.com. If you have not heard that interview or read his most recent posts at his website jsmineset.com I highly recommend doing so,not only for you but for all your readership.
    Basically the issue is who determines when a default is not a default. Apparently there is an organization, the ISDA (International Swaps and Derivatives Assoc.),whose power, in Jim’s words, exceeds the power of any government in that they determine when a “credit event” is a default or not. Essentially what we are talking about here is a situation similar to MFGlobal but of greater magnitude. My understanding is that the reason MF went under was because a default (by any other name) was not allowed to be deemed as such and the CD Swaps were not allowed to execute which would have kept MFGlobal whole. Since a 50% “haircut” is not considered a default, but is rather allowed to be considered a “redefinition” (or whatever they call it), then what will they call it when another 30% haircut has to be taken by those who hold Greek bonds? This is how MF went under and this is how other major Eurpean and American financial institutions will go under. They cannot afford to absorb the losses with the ISDA not allowing a default and hence the CD swaps trades to execute because 97% of all CD swaps are held by only four banking institutions (care to guess which ones?–hint, the same institutions which happen to comprise a significant part of the ISDA). These institutions are not going to rule against their own interests so QE to infinity is guaranteed. There is no other way out. Please check into this to verify my understanding. It truly is the end of the road for can kicking. John Williams observes that this is indeed “end of the world type stuff (though not sure he was commenting about this particular aspect of the whole financial landscape), and according to Jim Sinclair, the upcoming month of March is significant, specifically the date range of March 20 to 23rd. That lines up with recent comments made by Jim Willie as well , which I am wondering whether it is related to this same dynamic Jim Sinclair describes. All the best Greg God bless

  15. Jan

    Greece would have been so much better off if they had defaulted like Iceland. This link shows there is life after default:

    http://www.marketwatch.com/story/icelands-debt-comes-in-from-the-cold-2012-02-17?link=MW_story_investinginsight

    The banks got left holding the bag, not the citizens. This is as it should be.

  16. Ben Davis

    Greg,

    I had a week off from reading up on your articles due to my college class assignments (yes… I’m back in college at 57 years old), but with great results from it (3.5 GPA). My interest in your writing has a particular reason. My field of study is Creative Writing in Entertainment for the BFA degree at Full Sail. Having said that, now you know why I make such good comments!

    ANYWAYS…

    I watched O’Neil on FOX interview a high up executive in the Petroleum industry, and he GRILLED the guy to no end about the fuel prices going off the charts again!

    But before he got to that point on the conversation, his direction was on the current financial crisis in Greece and Europe. By the time he asked some very specific questions on OPEC and the American oil companies making such huge quarterly profits of late, O’Neil made a very big opinion as to why the US is NOT stepping up to defray the price increases.

    The answer always got the same dictation that we hear everyday on MSM news and broadcasts. My opinion is the MSM has no idea what to say or report to the public unless it is already pre-scripted (exactly as I’m learning in college). Not one single question asked got an answer worth listening to!

    Straight to the point is this:

    If American petroleum companies have more than enough fuels to provide our own economic woes, then why does our government allow them to export the product and raise the prices along with the OPEC standard?

    It is the exact same point of view that you write about regarding Greece and the financial system about to crash! Not to mention our own US dollar about to implode from the Bush years!

    To be quite candid with the world economy… IT IS GOING TO FAIL… Regardless of what any country our political talk can do about it! My prediction is June 5, 2012, that we shall see the results of everything coming to a reality check!

  17. Meatdawg

    Great article Greg. Is Greece the first “Domino” to fall in the Euro-default gambit? How much longer can the other “PIIGS” hold out and what implications will that have for the global economy, especially the American one? Thanks.

  18. nm

    Jim Sinclair is the only one talking about the ISDA’s manipulative role with all these CDS’s, but my question is this:

    If these parties PAID the banks for this CDS insurance and the banks are now refusing to pay up, could there be lawsuits in the future over this issue?

    Can the ISDA be sued for refusing to declare what is evidently a default?

    • Greg

      NM,
      All I can say is this is a awful mess and it is global. Good question but I do not have the answer–anybody?
      Greg

      • Sean

        NM and Greg,

        The answer is simple. Go to the ISDA website and look at the Board of Directors. It’s here:

        http://www2.isda.org/about-isda/board-of-directors/

        Now compare that list to banks from the following quote:

        “Five banks –JPMorgan, Morgan Stanley, Goldman Sachs, Bank of America Corp. (BAC) and Citigroup Inc. (C) –write 97 percent of all credit-default swaps in the U.S., according to the Office of the Comptroller of the Currency. The five firms had total net exposure of $45 billion to the debt of Greece, Portugal, Ireland, Spain and Italy, according to disclosures the companies made at the end of the third quarter. Spokesmen for the five banks declined to comment for this story.”

        The fox is guarding the henhouse. It’s all in plain sight for anyone who cares to find the info. It took me 10 minutes to dig and then put this response together. You won’t see this kind of “connect the dots” from mainstream media in a million years. Even Bloomberg hints that the whole CDS racket has no basis

  19. Martin

    Greg,
    Goldman alumni were inserted into Greece and Italy–Why??- so that the privately held bank debt was able to be sold to the publicly held (without the sheeple’s knowledge or permission) back door style to the Central banks. Greece has already defaulted ( negotiating lower rates for holders of debt) but will officially default in March and “we the sheeple” will once again be on the hook for the private banks risk taking. The banksters are officially out of control and with Goldman alumni also in the regulator positions NOTHING will be said or done about it.
    Out of some “Pelican Brief” scenario– no wonder by 2020 there will be 30,000 drones flying over us.

  20. Jim H

    Bottom line. Investors are the only ones who actually exist. Just ask ex Enron Employees. The bailout will go to them just as ours did. What happens after that matters not to them.

  21. DayOwl

    Ellen Brown understates the CDS/derivatives market by a factor of about 500. I’ve seen estimates of 1.5 QUADrillion. The entire wealth of the planet is estimated to be worth about $65 Trillion. The rest is “on paper.”

    How can Greece, such a small part of the world economy, bring down the “too-big-to-fails”? Because the big banks are leveraged 30:1, or even 100:1. (They have $100 in debt for every dollar in their accounts.) It only takes a small event, like a Greek default, to bring it all crashing down. That’s why there is so much scrambling right now to maintain the fiction that Greece is solvent. It’s needed to maintain the fiction that the banks are solvent, which they aren’t.

  22. Liquid Motion

    The whole financial monetary system is crashing to purgatory hell.
    This cannot be stopped or avoided. There is simply no escape.
    It is the meteor hurtling its way to Earth on a path of destruction.
    Greece is but the tip of that meteor.
    Beware……Hell hath no fury like a Central Bank scorned.
    The great sadness is knowing the unknown, and now known, does not of itself protect oneself from the ultimate fate.
    Destruction through GREED and the desire for CONTROL and POWER.

  23. Jim H

    Thanks Greg.

    One of the best laymen articles I’ve read on this subject.

    http://theintelhub.com/2012/02/23/argentine-advice-for-greece-default-now/

  24. Nathan

    I can tell you one thing. The anti-bailout parties will never be allowed to rule greece. They are already talking about postponing the elections.
    Move democracy! Europe/banks dictates now.

  25. Herman Gerbils

    Well, how would you feel if you opened your door, saw a well dressed man with the authorities and heard “Sir, your muti billionaire neighbor here went to Vegas and bet the farm. I mean blackjack, hookers and blow, poker, you name it and he lost his ass. You have to pick up the tab Sir, he plays by a different set of rules, his capital can not be risked, we (the police and government) work for him not you. You just pick up the check Sir, pick it up, PICK IT UP! Yeah, I would torch the place too, go all James Cann at the end of “Thief”. And how do you repossess the Parthanon or some other antiquity? (although a Pink Floyd concert from the Temple of Athena Nike would be cool just sayin) We in America don’t even get the knock on the door because our system does it automatically.

  26. Liquid Motion

    Thks Greg for reminding me…

    MEMO TO SELF……
    Write a tky note to the CB’s (esp. the former FED Chairman ) for putting the global monetary system on the path to destruction……

  27. Liquid Motion

    2nd Memo to self……..
    Plan a European summer vacation (Greek Islands)….I think it may be the cheapest holiday I will have in a lifetime.

  28. Liquid Motion

    3rd Memo……
    Invite Greg…..we have lots to talk about..!!!

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