Were this to lead to the collapse of a number of TBTFs it would either show that they are not too big to resolve or it would force what until now has been avoided - writedown of bad debt. Either outcome would be a positive. It would be highly ironic were Germany's aversion to allowing the ECB to print money were to lead to the writeoff of large portions of debt held by German banks, among others. Even were TPTB to manage to temporize the problem once again, even that would be illuminating.

I hope that Alexis Tsipras and others in Greece forcefully make the point to the Greek electorate that the bailouts are not of Greece, but of the lending banks and the the bank making a loan is always in a better position to know the quality of a loan than is the borrower. This is especially true when the banks making the loans are also massively involved in orchestrating attacks on currencies and the ECB refuses to deal with that problem - among a large list of willful failures.

"It is not necessary to have hope in order to persevere."

Beppe Grillo's Blog

My name is Beppe Scienza. I am a lecturer with the Department of Mathematics at the Turin University and I (unfortunately) deal above all with the topical issue of the abuse of savings. In the case of Greece, the issue is somewhat complex, and more than a little contradictory since, just a few weeks ago the television news and newspaper headlines were telling us certain things such as: "Greece has been saved", "Greek public debt successfully restructured" and "Greek bankruptcy averted". Then, suddenly, a couple of weeks ago, anyone who had, let's say, 10-thousand Euro in Greek Government Bonds, would suddenly have received 24 different bonds in return for his/her original Bonds and, when he/she proceeded to add up the respective values of these new Bonds, he/she would have discovered that they have a total combined value of only two thousand Euro. In other words, Greece was saved and I lost 80% of the money I invested, so what shall we call this? The truth must be told, and that is that there have been two separate misrepresentations here:

1. one perpetrated by the top politicians and the members of the European Union and its Central Bank, who said: "We are going to rescue Greece", "No way can Greece be allowed to fail under any circumstances" and "Greece must be saved" but meanwhile, they were hastily making preparations for Greece to go bankrupt, and
   
2. the second misrepresentation, which came a little while later because the fairy tale that is now doing the rounds is that Greece has been saved.
   

The restructuring of the Greek bonds, and God forbid they should go the same way as the Italian ones have, occurred in two phases:
1) first a proposal was put to the banks, provident funds and insurance companies, asking them to accept that the bonds they held be replaced with new government bonds and accept that the values be cut. In effect, the vast majority of these so-called institutional investors accepted this proposal although, as to just how willing they were to accept the proposal, I refer you to what the head of the German Commerzbank, Martin Blessing, had to say with regard to the acceptance of the restructuring of the Greek public debt, namely that: "This is about as voluntary as a confession made to the Spanish Inquisition". Whatever the case may be, the Central Bank somehow managed to convince the banks to accept this deal and that's their business.
What's not their business is that immediately thereafter, even those investors who had not agreed to the deal suddenly found themselves in that same boat, in other words the nominal value of the bonds they held was halved and their market value dropped by 80%. Now, in technical terms, this effectively amounts to "default" and is called insolvency. Whenever someone (whether it be a Country's Government or a private enterprise) is obliged to make interest payments or to repay any invested capital and fails to do so, in essence this amounts to bankruptcy, although in technical terms it is called insolvency or default. Greece has gone into default and is in a state of insolvency as regards those investors who did not agree to the restructuring deal. Greece has failed to meet its obligations and this is called insolvency, so Greece is effectively bankrupt. This is not the first time that that Country has gone bankrupt and indeed all Greeks will undoubtedly remember the statement made on 10 December 1893 by the then Prime Minister Charilaos Trikoupis, who said in Greek: "Δυστυχώς επτωχεύσαμεν" (distihós eptohéfsamen), which translates as "Unfortunately we are bankrupt".
So the Country was bankrupt then, and similarly it went bankrupt once again in the 30's. The Greeks truly can, and do honestly say "Δυστυχώς επτωχεύσαμεν ξανά" (distihós eptohéfsamen ksaná), or "Unfortunately we are bankrupt once again". So, let's stop bullshitting everyone by saying that Greece has not gone bankrupt because Greece has indeed gone bankrupt!

Same face, same race
However, it must be said that there is something rather strange about this whole restructuring deal and that is that it has not affected everyone equally because something happened that, if such a thing was to happen in the case of a private company, it would be called preferential bankruptcy and would be classified as a criminal offence. By the end of 2011, Greece's public debt amounted to 380 billion Euro, which is extremely high and more than 170% of GDP. One would expect that that figure would have at least been halved by now, yet it hasn't, but why? Well, prior to the restructuring and prior to the voluntary agreement to the public debt cutting proposal, a little sleight of hand occurred whereby the codes of all the bonds held by the European Central Bank, the Bundesbank, the Italian Central Bank, etc, suddenly changed and these bonds remained unaffected by either the proposal or the mandatory value cuts. These bonds, which remained as they were except for the new codes, received their interest earnings in full and the full value of the ones that had expired was paid out, no bankruptcy there then!
Now we can't honestly say that any private individual benefitted from all of this, but only the same old European Union financial system that lent the money in the first place. The action may even be justified, however, it is nevertheless rather strange and was discussed and even object to by Bundesbank President Weidmann, who felt that if the truth be told, this action appeared to be very strange indeed. So Greece was indeed bankrupt, but not when it came to the Greek Government Bonds held by the various central banks.
At this point, the important thing is not to become embroiled in any legal action against Greece and not to hand over any money to attorneys that promise to instigate legal action to recover at least some of the money that has been lost. Sovereign States are called "Sovereign States" precisely because the can decide not to pay their debts if they so wish, so either we declare war against them or that's the end of the story. Now no one is thinking of declaring war against Greece, however, it is important not to throw good money after bad by instituting legal action, even if there is a good chance of winning it in Court because, although a number of parties won legal cases against Argentina, some even in the American courts, it all came to nought because they won the court cases but they never did get any of the money awarded to them.
...

One question that many people are asking themselves is: "How come we have gotten to this point?" It is said that it happened because the Greeks were falsifying their public accounts and was making a mess of it too. This is true, undoubtedly Greece was utilising derivative contracts, which is the reason behind the disasters in many of our Italian municipalities, regions and provinces. Greece had even done this with Goldman Sachs, for example, when Mario Draghi was with Goldman Sachs, just in the interests of accuracy. They had hidden the shortfalls and had made the public debt appear to be less than it really was. All of this in unquestionably true, however, it must also be said that a little more diligence, adroitness and farsightedness by the European Union and the European Central Bank would also have gone a long, long way indeed. How is it possible that no one had any suspicions whatsoever until finally, in 2010, the financial markets began to become concerned about Greece? How come, since Greece's entry into the Eurozone, in other words for an entire decade there was never any suspicion that perhaps someone in Greece was busy fiddling the books or making things look better than what they actually were? Maybe everyone chose to look the other way because various other Countries, such as France, Italy or Germany were perhaps also doing something very similar. Someone had to know what was going on. Not everyone at the European Central Bank or the German one is a total idiot. There must have been some suspicion that all was not as it seemed, yet no one ever said anything. It would have been better if they had said something earlier, back in 2007 for example, when Greece's public debt amounted to only 115% of its GDP.

merkel is in a devilish bind of her own making, either she loses right wing industrial/bankster political support in germany, result: career down in flames.

or: europe jettisons greece like so much useless ballast and the rest of europe realises the hangman's rope austerian policy is and rises up to roundly defeat it.

and angie gets to go down in history as the willing idiot who pulled the lever, judge, jury and executioner all in one 3-fer!

when europeans realise the depths of this scam, and not only their fond faith in the humanitarian and peace-loving EU project was in reality just a way to hold the patient in coma while harvesting individual organs for sale to the invisible idiot with the groping, pickpocket, increasingly visible hand.

the 4 trillion E question is will EU citizens stand idly by seeing their sovereignty, nay even their national patrimony ripped from under their feet to keep the 1% in profits?

we may be learnedly helpless (good description of bloggers!), we may be spinning from the avalanche of lies coming from most media and our leaders, we may be senile and rendered penniless, hungry and thrown into the street, but their gamble that we aren't going to make any fuss as we go kettled into the alleys and brutalised by rentathugs, or herded into the showers of zyklon B to cleanse us of our fiscal sins.

people are not going to go into that good night as passively as our lords and masters, living in the past might wish.

why did it have to come to this indeed! as usual, the powerfreakery of a few greedy bastards determining the fate of millions of the duped.

the best they can hope for is we take our own lives and save them the trouble, as is sadly proving often to be the case...

the comeuppance for these parasites will he unstoppable once it kicks in properly, as their provocations practically guarantee that result. they have sated desire of honest governance with a consumerist ersatz satisfaction, as that is removed, expect sparks to fly and people who have nothing further to lose throw themselves into the gears of an unjust machine.

frau merkel is toast either way. she's lucky if she isn't carbonised... lecturing people after raping them is hardly fetching behaviour, and thatcher's drooling decrepitude surely also awaits her senescence.

grr

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

1.  The first accomplishment needing to be done is stop the bleeding.  

2.  Recognize Greece has a Public Relations problem.  You're not going to solve the mess solely on your own so you need political allies and to do that you'll need to change the current CW in the rest of Europe you're all a bunch of wastrels.  "Scruffy Southerns," in Migeru's phrase.  A necessary - IMO - action to take to drive this is ...

3.  Bring the corrupt to justice.  Not only the politically corrupt but also their "enablers" in the economic realm.  I note people in the Nordic countries take a dim view of public corruption and when the message is driven home that most of the problem(s) in Greece was caused by corruption and you're taking steps to bring the guilty to account you'll have a two'er.

4.  And I can't emphasis this enough: SYRIZA needs it's own media organizations to 'get the word out' in Greece and elsewhere in the EU.  If you do as hoped TPTB are going to attack you 24/7 for everything from being UnSerious© to goat fucking.  You'll start off with a good deal of Street Cred but you'll lose it if you don't fight.  And remember you're doing mass media Journalism and you'll need to use the forms and techniques of mass media Journalism, i.e., Take a Lesson from Murdoch.

5.  Catchy Slogan for your policies.  Something like "Greece is Working."

Stop the Bleeding: reduce the need for Greece to import oil

Bring the Guilty to Justice: attack the oil importers for selling Greece out to foreign multinationals.  Prosecute people and businesses for corruption, special favors, etc.

Greece is Working: programs to build wind, solar, etc. power production units, building urban mass transit systems to reduce the need for imported oil, & all that kinda stuff.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

1. No. The Euro will stand or fall depending on Germany's willingness to accept a Eurobancor, unrestricted Eurosystem money printing or a federal European employer/investor of last resort with an unlimited ECB overdraft facility. The Greek decision on austerity or not has nothing to do with it one way or another. Which means that Greek Euro membership will not be safe if it ditches austerity... but neither will it be if it implements austerity.


2. An all-out war is improbable. Greece has too many white people and too many NATO weapons. However, it is almost certain that you will be looking at a suspension of voting rights, freezing of cohesion funds and assorted other economic and political sabotage, ranging from the dubiously legal to the nakedly unconstitutional.

   But the alternative to anti-austerity policies, default and sanctions are not austerity, no default and no sanctions. Greece will eventually default. Anybody who tells you otherwise is either selling you a bill of goods or has rocks and gravel in his head. And when it does, this assault will come anyway.

   So the relevant question is whether compliance with the austerity measures will increase your preparedness for the default and consequent exclusion from hard currency credit. This is only true if the time it buys is spent building strategic food and fuel reserves, drawing up plans for rationing schemes, etc., and then only if these preparations increase preparedness faster than austerity measures increase the magnitude of the catastrophe.



3. It probably won't. At this point, anybody in the EU who does not have rocks and gravel in his head knows that Greece will default, and they're just playing musical chairs with the blame (and bill) for the ensuing clusterfuck. And those who have rocks and gravel in their heads will continue to pursue their current policies, undeterred by little things like obvious reality.

- Jake

Friends come and go. Enemies accumulate.

Of course the Central Banker in Cyprus was not happy with this fiscal profligacy, and was creating problems and pressure for the government to stop the automatic inflation adjustment of wages and cut down on benefits and public investment. The Cypriot government insisted on its policy, so when Athanasios Orphanides term was up, he was not reappointed, despite a huge fuss and roar from the ECB itself and the Cypriot opposition.

The President of Cyprus and the government spokesman accused Orphanidis of playing a political anti-government role during his whole tenure and insisting on cuts for the weak, while ignoring the necessity to tax the richest, and accused him for failing in his regulatory role, by allowing Cyprus' banking system overexposure to Greek bonds...

If the ECB is not happy about Orphanides removal, they will be even less happy about his replacement: Panikos Demetriades, is a professor of financial economics at the University of Leicester in Britain, who has been critical of ECB policies over the past two years and has called for... Germany quitting the Euro:

Demetriades: a new Keynesian at the CB's helm:

Demetriades, a keen blogger, is a critic of the idea that stringent austerity measures alone can turn an economy around, espousing the view that austerity should be limited to an economy's absorption capacity without sinking it into recession.

Perhaps his most notable public intervention was his suggestion last year that Germany should re-adopt the mark currency to help weaker euro zone members. He argued that euro strength as a result of its link to the powerhouse German economy was an impediment to growth elsewhere in the bloc.

...Demetriades has also argued for more direct support to states finding it difficult to raise funds on markets.

In articles, he has questioned the ECB's "problematic" mandate of keeping inflation close to, or below, 2.0 per cent.

"The alternative would have as its primary target recovery and the achievement of healthy growth for Greece and the euro zone," Demetriades wrote in his blog last November... So instead of a 2.0 per cent inflation target, and ignoring everything else ... the primary target of economic policy should be increasing GDP by 2.0 to 3.0 per cent per annum, in real terms."

It will be interesting to see how he interacts with his new colleagues to say the least...

So Cyprus has sent a message that there exist other paths other than surrender to the markets and its oracles of societal doom. But elections are in and its likely that the electorate will swing back to the conservatives. And they'll live to regret it...

The road of excess leads to the palace of wisdom - William Blake

Minister for Finance Michael Noonan has today warned he will have to introduce a tougher budget that will include tax increases if the public rejects the Fiscal Treaty Referendum.

Speaking on his way into a Cabinet meeting this morning, Mr Noonan rejected suggestions that the country would still be able to access funding if a No vote is returned by the electorate.

"It's very clear on this treaty that only those countries that ratify it will have access to European Stability Mechanism (ESM) funding and there are no other funds," he said.

"If there's a No vote the Budget I'll be planning for later in the year will be dramatically more difficult than if there's a Yes vote.

"If people think that by voting No they'll avoid further tax cuts and increases, actually a No vote will do the opposite," he added.

Fianna Fáil described Mr Noonan's comments as "unhelpful" and said they would only serve to alienate potential Yes voters.

The problem is not that there is no mechanism for stimulating the Irish economy in the event of a no vote and a default (or similar) on Anglo Irish promissory notes etc. -  the problem is that the national elite have absolutely no idea how this might be done.

Index of Frank's Diaries