Gods of the World
Tuesday, November 22, 2011
Saturday, November 19, 2011
Since now its getting all the way to occupy NYC subway stations...
And yes, if the people really understood the real issues in America, they should get the hell out of NYC, use their brains to think a little and go occupy Washington instead...
Tuesday, November 08, 2011
Where Does The Greek Bailout Money Go?
Zerohedge: Greece is about to get an installment of 8 billion Euro. I'm going to assume that is their quarterly installment.
Greece is running a primary deficit of about 6 billion Euro (as best as I can figure out). So that is 1.5 billion per quarter. So about 19 cents of every Euro of bailout money makes it way to fund Greece's current overspending.
As best as we can tell, Greek banks hold about 75 billion of debt and other Greek entities hold about 25 billion, bringing the total to 100 billion. Assuming about 350 billion in total debt (again somewhere in the ballpark), that means about 23 cents go to Greek entities as debt service. That number is a bit misleading, as much of this has been pledged to the ECB for funding, so although it supports the Greek banks, it also goes to the ECB.
The ECB holds 55 billion of Greek bonds directly. So 18 cents of every Euro of the bailout goes to the ECB.
The "market" and "bilateral loans" total about 175 billion from what we could find. This is a bit lower than the 205 billion the IIF is talking about, but seems in the right ballpark. So about 40 cents of every Euro of the bailout is used to service debt held by non Greek banks and financial institutions.
We didn't look at the specific maturities, and just used averages. To the extent Greek pension funds for example, hold longer dated maturities, less of the money is really going to them, but for now have assumed that each group holds a similarly balanced portfolio.
We also haven't figured out about the 90 billion of derivative exposures Greece has and whether any bailout money is being used to pay on those.
In the end less than 19 cents of the bailout are going to allow Greece to continue its overspending. About 23 cents goes to Greek institutions, though at this point, all of that is held by the ECB, so it is not fully benefiting Greece.
18 cents are going to the ECB directly and 40 cents are going to banks and insurance companies outside of Greece. So at least 58 cents of every bailout Euro is going outside of Greece, and depending on how you treat the repo agreements, that number could easily be 70 cents.
So yes, Greece is getting a bailout, but you can see why Merkozy got so scared at the idea of a referendum. The bulk of the money that Greece is "getting" comes right back to the rest of the EU. Whatever posturing is going on, Greece will get away without meeting any of its stated goals, or at least it will until the EU decides it has written down enough principal and that the ECB can handle the shock.
This is our first attempt at breaking down where the bailout money really goes. We have made a lot of assumptions and found data that seems sketchy at best, but will work on fixing any mistakes. We do think it is an interesting way to look at it, and confirms who really has the problem with a Greek default - and it's not Greece.
Greece is running a primary deficit of about 6 billion Euro (as best as I can figure out). So that is 1.5 billion per quarter. So about 19 cents of every Euro of bailout money makes it way to fund Greece's current overspending.
As best as we can tell, Greek banks hold about 75 billion of debt and other Greek entities hold about 25 billion, bringing the total to 100 billion. Assuming about 350 billion in total debt (again somewhere in the ballpark), that means about 23 cents go to Greek entities as debt service. That number is a bit misleading, as much of this has been pledged to the ECB for funding, so although it supports the Greek banks, it also goes to the ECB.
The ECB holds 55 billion of Greek bonds directly. So 18 cents of every Euro of the bailout goes to the ECB.
The "market" and "bilateral loans" total about 175 billion from what we could find. This is a bit lower than the 205 billion the IIF is talking about, but seems in the right ballpark. So about 40 cents of every Euro of the bailout is used to service debt held by non Greek banks and financial institutions.
We didn't look at the specific maturities, and just used averages. To the extent Greek pension funds for example, hold longer dated maturities, less of the money is really going to them, but for now have assumed that each group holds a similarly balanced portfolio.
We also haven't figured out about the 90 billion of derivative exposures Greece has and whether any bailout money is being used to pay on those.
In the end less than 19 cents of the bailout are going to allow Greece to continue its overspending. About 23 cents goes to Greek institutions, though at this point, all of that is held by the ECB, so it is not fully benefiting Greece.
18 cents are going to the ECB directly and 40 cents are going to banks and insurance companies outside of Greece. So at least 58 cents of every bailout Euro is going outside of Greece, and depending on how you treat the repo agreements, that number could easily be 70 cents.
So yes, Greece is getting a bailout, but you can see why Merkozy got so scared at the idea of a referendum. The bulk of the money that Greece is "getting" comes right back to the rest of the EU. Whatever posturing is going on, Greece will get away without meeting any of its stated goals, or at least it will until the EU decides it has written down enough principal and that the ECB can handle the shock.
This is our first attempt at breaking down where the bailout money really goes. We have made a lot of assumptions and found data that seems sketchy at best, but will work on fixing any mistakes. We do think it is an interesting way to look at it, and confirms who really has the problem with a Greek default - and it's not Greece.
Thursday, November 03, 2011
G-20 Will Ask IMF To Print Reserve Currency??
ZeroHedge: Four months ago we predicted that in response to the latest round of global economic deterioration, every central bank would very soon join the toner party. Since then we have seen the Fed commence Operation Twist and telegraph another episode of MBS asset purchases; a new QE episode at the Bank of England; a new round of covered bond purchases at the ECB, coupled with an interest rate cut by its latest Goldman Sachs-based president, not to mention the persistent attempts to generate a backstop central bank in the form the EFSF Frankenstein Swiss Army knife; a new round of asset purchases and a massive, several hundred billion snap FX intervention by the Bank of Japan; and last but not least, that stalwart of stability, the Swiss National Bank, went ahead and destroyed the Swiss Franc as the sanest among the fiats by pegging it to that most unstable of currencies, the Euro. In light of the above how gold is not trading north of $2000 is still beyond us, although whether by manipulation or market inefficiency, we can not complain: it is easier to buy gold at $1,750 than at $7,150. Yet not even we could possibly predict just how far the global ponzi cartel would fall to extend the status quo by a few extra months. Because according to Dow Jones, the latest and greatest purchaser of Heidelberg Mainstream 80 machines will be the, drum roll, the IMF! Yes, the same organization that DSK swore would never join the global central banking stupidity, since deposed with a false allegation, and now headed by the woman who brought France to the brink of ruin, will be the marginal printer, now that everyone else is "dodecatuple all in" and sitting all day on the Turbo Print button.
Super Mario Enters the Ring
Zerohedge: Today marks the beginning of a new era for the ECB, with Mario Draghi taking over the helm from Jean-Claude Trichet as the President of the central bank. Unfortunately for Draghi, the changeover is to take place at a very critical juncture and at a time when market participants are demanding that the central bank takes more pro-active measures to stimulate the stagnating economy which stands on the brink of a double dip recession. However, such action may prove difficult for Draghi to push through the governing council since doing so only few months after Trichet announced that the central bank is to resume covered bond buying and 12-month LTROs risks undermining the central banks’ credibility. Another reason why a rate cut may prove futile is that the meeting coincides with the G-20 summit where leaders of the Eurozone are expected to endorse use of the leveraged EFSF fund as an investment opportunity for countries with a large budget surplus such as China and other BRICS. In turn this indicates that comments stemming from the summit may have a more profound impact on investors’ appetite for the EU related financial instruments and therefore determine whether the EUR/USD pair consolidates above the 1.4000 level.
As such, it looks more likely that the ECB will remain committed to further purchases of various EU bonds via the SMP program until lawmakers in Europe agree on finer details regarding the implementation of the recently proposed leveraged EFSF. This move will be particularly welcomed since the bond yield spread between the German 10-year and Italian 10-year BTP is trading back at record wide levels in spite of Berlusconi’s government introducing further austerity measures to meet the proposed deficit reduction levels. Nevertheless, given that the ECB does not pre-commit to future policy manoeuvre suggests that Draghi may leave the door open for a rate cut later in December should the economic conditions deteriorate further.
Elsewhere, policymakers will remain mindful of the recent controversy stirred by the Greek PM Papandreou after he called for a referendum on measures agreed by the EU leaders to tackle the Greek debt situation in a recent summit. The uncertainty caused by the announcement may prompt the ECB to refrain from further easing until the situation settles down. However, the Central Bank may need to continue with its stance of providing ample liquidity as well as continue buying Eurozone government bonds to micro-manage soaring bond-yields. If the latter is to be the case, Bunds will likely come under pressure and we may observe tightening of the Eurozone 10-year government bond yield spreads, while EUR may also receive support. Finally, ongoing volatility in Eurozone bank shares may guide the ECB to relax collateral rules and market participants will also watch keenly any comments pertaining to ECB’s USD-liquidity operations.
As such, it looks more likely that the ECB will remain committed to further purchases of various EU bonds via the SMP program until lawmakers in Europe agree on finer details regarding the implementation of the recently proposed leveraged EFSF. This move will be particularly welcomed since the bond yield spread between the German 10-year and Italian 10-year BTP is trading back at record wide levels in spite of Berlusconi’s government introducing further austerity measures to meet the proposed deficit reduction levels. Nevertheless, given that the ECB does not pre-commit to future policy manoeuvre suggests that Draghi may leave the door open for a rate cut later in December should the economic conditions deteriorate further.
Elsewhere, policymakers will remain mindful of the recent controversy stirred by the Greek PM Papandreou after he called for a referendum on measures agreed by the EU leaders to tackle the Greek debt situation in a recent summit. The uncertainty caused by the announcement may prompt the ECB to refrain from further easing until the situation settles down. However, the Central Bank may need to continue with its stance of providing ample liquidity as well as continue buying Eurozone government bonds to micro-manage soaring bond-yields. If the latter is to be the case, Bunds will likely come under pressure and we may observe tightening of the Eurozone 10-year government bond yield spreads, while EUR may also receive support. Finally, ongoing volatility in Eurozone bank shares may guide the ECB to relax collateral rules and market participants will also watch keenly any comments pertaining to ECB’s USD-liquidity operations.
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