If Greek Debt Deal Blows Up–$1 Trillion in Losses!

By Greg Hunter’s USAWatchdog.com

There are more ways for the world economy to get much worse than there are ways for it to get better. One landmine waiting to be stepped on is the Greek sovereign debt.  The IMF and the European Central Bank are running the show, and the deal on the table now requires bondholders to voluntarily take steep cuts.  Some are calling the debt deal a “highly organized gamble.”  

According to the Sydney Morning Herald story out today, bondholders are going to take steep losses, “The deal clinched by euro zone finance ministers in the early hours of February 21 involves investors taking a nominal 53.5 per cent loss, which equates to a real 73-74 percent loss after taking into account the loss on future interest payments.”  (Click here for the complete SMH story.)  If these are the kinds of losses being forced on bondholders, won’t other heavily indebted PIIGS want the same deal and can the banks afford it?  That’s a question for the not-so-distant future.

The only catch in this last ditch effort to keep Greece in the EU is:  it’s only good if 75% of the bondholders participate in the debt restructuring.  The deadline for bondholders to accept the deal is now Thursday (3/8/12.)   If the bondholders don’t take the deal, Greece will likely default on its next debt payment due March 20 and will probably exit the Euro experiment.   The deal is far from done.  The LA Times reported earlier today, “The IIF (Institute of International Finance) put out a statement Monday listing all the bond holders who are willing to take the deal. Bloomberg estimated that they only account for 20% of the total participants needed. Greece’s finance minister told Bloomberg Television this is the only chance bond holders will get.  “This is the best offer because this is the only one, the only existing offer,” Evangelos Venizelos said.  If they don’t take it, today’s stock market declines may look like small potatoes.”  (Click here for the complete LA Times story.)

So, keep your eyes on the Greek debt deal.  If it goes sour, Greece will be the first in a long line of dominos to get knocked down.

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  1. Chuck Allen

    Hi Greg,

    Is Greece the canary in the gold mine? If the canary dies from crushing debt, it won’t be long before the huge global debt collaspes on the heads of everyone.

    The whole global financial crisis is being forestalled by the upcomming U.S. election. Look out for a lot of crushed canaries this coming winter.

    • Greg

      Chuck Allen,
      Maybe a lot sooner. Thank you for the comment.

  2. Troy

    Thank You Greg for this news.

    20th is not far off.

  3. Steve

    Quote:”The deadline for bondholders to accept the deal is now Thursday (3/8/12.) If the bondholders don’t take the deal, Greece will likely default on its next debt payment due March 20 and will probably exit the Euro experiment.”

    Then let the party begin, and then,

    let us get on with life!!

  4. Ambrose


    “If Greek Debt Deal Blows Up … “ I would say, “Let it blows but please makes it quick!” How much longer do the Greeks want to prolong the inevitable? May be if Greece goes default, the Greeks finally realize it is “Game Over” and accept the fact that the country really needs to be reformed?

    The domino effects could be disastrous to the world but a lot of countries desperately need an overhaul to their financial systems. There is no real financial security when the world’s economy is sitting on top of two ticking bombs – the U.S. debt crisis and the European debt crisis. Until the bombs are disarmed or discharged, we are living on shaking ground. None of our money will be safe from the next Tsunami.


  5. June

    alrighty then…next up Spain, Portugal, and maybe France? What exposure does the US have in this? What will the US do if we have way to much exposure? Print more money?

    • Greg

      I think this is why investors like Marc Faber and Jim Rogers own physical gold and probably silver. Thank you for the comment.

  6. Jim H

    Thanks Greg
    Audacity has been a key word in the western world Elite’s ideas of what people will tolerate. The people of Greece have already booted out a better government than what they have now. Whatever great plan this unelected group of pick pockets has could easily and quickly turn into a “let them eat cake” event. Just know they are still (violently in some cases) protesting, though the MSM no longer covers it.Greece will default.

  7. George Too

    Time to cash out CD’s and about anything else and put in something to protect your wealth.
    In addition, Greg, I see you posted a news article on the sidebar that the Chevy Volt can’t be that bad. It is. A well-equipped Volt list for about $46K (2012) and you can pick one up for about $40K before the rebate. They say you can go 40 miles on the battery alone…but that depends on outside temp {basic chemistry: speed of reaction doubles with 10 degree rise in temp…translation, batteries will work better when hot up to a certain point} and whether you are running the radio, heater and/or air conditioning. Reports are you get 22-26 in reality on the battery before the gas motor kicks in. the 90+ miles per gallon is calculated using the same math the US Government calculates its budget deficit. At 40 miles, I could have gotten my wife to work and back with one or two side trips if planned properly. 22-26 mpg doesn’t come close to meeting my needs…I like being warm and/or cool and to listen to my tunes.
    I know that gas prices are going to skyrocket. I seriously consider the Volt as an option. The math does not work out. I can buy a Ford Focus, about the same size, get 40 MPG and it is a whole lot cheaper. The batteries have a limited life. I can drive a Focus or a Chevy Cobalt for a decade. There are no good estimates on the Volt’s battery life but I would be surprised if you got five years. Same basic design as a laptop battery and I have not gotten over three years on one I used regularly.
    I love the propaganda about the Chevy Volt being, “The car we had to build!” Yeah, they had to build it to get extra “Green” money and they had to build it to make Mr. Obama look good with his wacko eco extremist. You know the ones I mean. They work for an Environmental charity but drive Hummers. I remember a few years ago when a new anchor ambushed one in the parking lot and they justified it saying that they did more in one day to save the environment than other people did in a year so they deserved to be comfortable. Isn’t that the same logic the bankers are using to justify being bailed out? That they do more for the economy so they deserve a bailout and a big bonus for mucking up the economy.
    I think if you could get the sales data, you will find the Federal and State government motor pools bought a significant percentage of total sales. If I spend $40K on a car it is going to be a BMW, not a Chevy Volt.

    • Greg

      Thank you George Too,
      I admit I am biased because I drive only Chevys. All are very good and I would put them up against any comparable foreign product. You make good points on the Volt but what was spent on GM is a drop in the bucket to what we have spent and will spend in propping up the insolvent banks. At least GM is trying to make a good product and build something here in America. You are still my buddy though!!

      • George Too

        I like the Chevy Equinox. 32 mpg, has room and the retail of a well-equipped one is 31K. Or a comparable Ford. Ford gets extra points for not taking a bail out. Still mad about the illegal subornation of debt that Mr. Obama pulled. They could have operated in Bankruptcy just like others have. The plan is that the next car we buy is for it to be American made.

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