More On Greece And More QE

From http://truthingold.blogspot

One of the biggest issues in Europe at the moment is whether or not Greece will exit, or be allowed to exit, the EU.  My view is that the massive bailouts that have been going on globally since 2008, starting with the massive taxpayer bailout of the big U.S. banks, are about saving the banks and not about saving countries. Because of this, I would argue that Greece will be kept in the EU family and the financial systems in Spain/Italy/France/England/U.S. will be re-monetized, likely in that order.

But let’s look just at Greece for a moment.  It has been estimated that the big banks have around $60-70 billion in derivatives exposure to Greece.  The “net” exposure is supposedly around $3 billion.  Of course, we are now seeing with the JP Morgan derivatives meltdown going on that the “net” number reported by banks and widely accepted by regulators and institutional investors is not to be trusted.

I think it’s probably fair to estimate that, in a chaos, “2-sigma” scenario, that the likely “net” exposure to Greece via derivatives is at least 50% of the notional.   Mind you, this estimate rests on the viability of the counterparties who have issued payment guarantees in the event of default being able to stand up their side of contract.  This is not a given.  But let’s go with 50% for the sake of running a “stress test” (note:  a realistic stress test as opposed to the Fed’s fraudulent version of a stress test – see JP Morgan for more proof the Fed is full of shit).

Now let’s run through the math if Greece leaves the euro.  If this happens, Greece would reinstate the drachma as its currency, which would then start trading against all other fiat currencies (plus gold) in the world forex market.  It has been estimated that a new drachma would likely trade at about 30-40 cents vs. euro, so roughly 38-50 cents vs the dollar.  Now,  what happens to the value of a credit default swap on Greek debt that was denominated in euros but is now denominated in drachmas, because Greece would now be paying those debt claims back in devalued drachmas?

For the sake of argument, let’s say banks which are the largest underwriters of credit default swaps have 90% of the exposure to Greek credit default swaps.  This is actually a quite realistic assumption per the quarterly BIS report on OTC derivatives, with JP Morgan by far the largest underwriter of these instruments.  This would mean that U.S. banks likely have gross derivatives exposure $45-63 billion in Greek credit default swaps.  If Greece were to revalue and repay its debt claims using drachmas, it would mean that the big banks like JP Morgan would potentially be on the hook for their ratable share of $22-32 billion in credit losses.

Greece will run out of money in ‘a few weeks’ says former Prime Minister George Papandreou [arabianmoney]

After the Spanish banking bailout drama the action now swings back to Greece for the election this weekend. Former Prime Minister George Papandreou tells Bloomberg TV’s Sara Eisen that Greece has ‘a few weeks’ before its government runs out of money and that this is a ‘make or break’ period.

What a classic understatement: Greece is going down and wants to pull the whole global financial system down with it. In short, the message is save us or you destroy your system. It is this sort of blackmail and subterfuge that has gotten Greece into such a horrendous mess.

Read more  – Video

Max Keiser and Hugo Salinas Price on Sunny TV – Athens, Greece



Save us from the saviours


Slavoj Žižek  on

Imagine a scene from a dystopian movie that depicts our society in the near future. Uniformed guards patrol half-empty downtown streets at night, on the prowl for immigrants, criminals and vagrants. Those they find are brutalised. What seems like a fanciful Hollywood image is a reality in today’s Greece. At night, black-shirted vigilantes from the Holocaust-denying neo-fascist Golden Dawn movement – which won 7 per cent of the vote in the last round of elections, and had the support, it’s said, of 50 per cent of the Athenian police – have been patrolling the street and beating up all the immigrants they can find: Afghans, Pakistanis, Algerians. So this is how Europe is defended in the spring of 2012.

The trouble with defending European civilisation against the immigrant threat is that the ferocity of the defence is more of a threat to ‘civilisation’ than any number of Muslims. With friendly defenders like this, Europe needs no enemies. A hundred years ago, G.K. Chesterton articulated the deadlock in which critics of religion find themselves: ‘Men who begin to fight the Church for the sake of freedom and humanity end by flinging away freedom and humanity if only they may fight the Church … The secularists have not wrecked divine things; but the secularists have wrecked secular things, if that is any comfort to them.’ Many liberal warriors are so eager to fight anti-democratic fundamentalism that they end up dispensing with freedom and democracy if only they may fight terror. If the ‘terrorists’ are ready to wreck this world for love of another, our warriors against terror are ready to wreck democracy out of hatred for the Muslim other. Some of them love human dignity so much that they are ready to legalise torture to defend it. It’s an inversion of the process by which fanatical defenders of religion start out by attacking contemporary secular culture and end up sacrificing their own religious credentials in their eagerness to eradicate the aspects of secularism they hate.

But Greece’s anti-immigrant defenders aren’t the principal danger: they are just a by-product of the true threat, the politics of austerity that have caused Greece’s predicament. The next round of Greek elections will be held on 17 June. The European establishment warns us that these elections are crucial: not only the fate of Greece, but maybe the fate of the whole of Europe is in the balance. One outcome – the right one, they argue – would allow the painful but necessary process of recovery through austerity to continue. The alternative – if the ‘extreme leftist’ Syriza party wins – would be a vote for chaos, the end of the (European) world as we know it.

The prophets of doom are right, but not in the way they intend. Critics of our current democratic arrangements complain that elections don’t offer a true choice: what we get instead is the choice between a centre-right and a centre-left party whose programmes are almost indistinguishable. On 17 June, there will be a real choice: the establishment (New Democracy and Pasok) on one side, Syriza on the other. And, as is usually the case when a real choice is on offer, the establishment is in a panic: chaos, poverty and violence will follow, they say, if the wrong choice is made. The mere possibility of a Syriza victory is said to have sent ripples of fear through global markets. Ideological prosopopoeia has its day: markets talk as if they were persons, expressing their ‘worry’ at what will happen if the elections fail to produce a government with a mandate to persist with the EU-IMF programme of fiscal austerity and structural reform. The citizens of Greece have no time to worry about these prospects: they have enough to worry about in their everyday lives, which are becoming miserable to a degree unseen in Europe for decades.

Such predictions are self-fulfilling, causing panic and thus bringing about the very eventualities they warn against. If Syriza wins, the European establishment will hope that we learn the hard way what happens when an attempt is made to interrupt the vicious cycle of mutual complicity between Brussels’s technocracy and anti-immigrant populism. This is why Alexis Tsipras, Syriza’s leader, made clear in a recent interview that his first priority, should Syriza win, will be to counteract panic: ‘People will conquer fear. They will not succumb; they will not be blackmailed.’ Syriza have an almost impossible task. Theirs is not the voice of extreme left ‘madness’, but of reason speaking out against the madness of market ideology. In their readiness to take over, they have banished the left’s fear of taking power; they have the courage to clear up the mess created by others. They will need to exercise a formidable combination of principle and pragmatism, of democratic commitment and a readiness to act quickly and decisively where needed. If they are to have even a minimal chance of success, they will need an all-European display of solidarity: not only decent treatment on the part of every other European country, but also more creative ideas, like the promotion of solidarity tourism this summer.

In his Notes towards the Definition of Culture, T.S. Eliot remarked that there are moments when the only choice is between heresy and non-belief – i.e., when the only way to keep a religion alive is to perform a sectarian split. This is the position in Europe today. Only a new ‘heresy’ – represented at this moment by Syriza – can save what is worth saving of the European legacy: democracy, trust in people, egalitarian solidarity etc. The Europe we will end up with if Syriza is outmanoeuvred is a ‘Europe with Asian values’ – which, of course, has nothing to do with Asia, but everything to do with the tendency of contemporary capitalism to suspend democracy.

Here is the paradox that sustains the ‘free vote’ in democratic societies: one is free to choose on condition that one makes the right choice. This is why, when the wrong choice is made (as it was when Ireland rejected the EU constitution), the choice is treated as a mistake, and the establishment immediately demands that the ‘democratic’ process be repeated in order that the mistake may be corrected. When George Papandreou, then Greek prime minister, proposed a referendum on the eurozone bailout deal at the end of last year, the referendum itself was rejected as a false choice.

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HSBC Tests Cash Machines in Athens for Drachmas [greekreporter]


HSBC has tested its cash machines in Greece to check whether they could cope with the reintroduction of the drachma if the country drops out of the euro. It is the clearest sign yet that the international financial sector believes Greece is on the brink of quitting the single currency and returning to its former currency.

An HSBC spokesman said, “Like all banks, we have been working with regulators to undertake preparatory work at multiple levels in the event of a sovereign default, an exit from the euro, or any other eventuality.”

Banking sources noted that it was the fear that Royal Bank of Scotland customers would not be able to withdraw their money from ATMs that marked the high point of the financial crisis in Britain in 2008 when the Government intervened to prop up RBS and the rest of the banking sector.

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Food Shortage in Peloponnesian Prisons Due to State Budget Cuts


Amidst the deepening financial crisis, the state budget for many prisons has decreased to a minimum for some months now resulting in hundreds of detainees being malnourished and literally surviving on the charity of local communities, aProto Thema article reveals.

The latest example is the prison in Corinth where there’s a supply stoppage from the nearby military camp, and prisoners are about to starve reports prison staff, since not even one grain of rice has been left in their warehouses. The prison staff reports they haven’t received any state funds for the last three months.

A few days earlier, the commander of the camp announced to prison management the transportation stoppage, citing lack of food supplies even for the soldiers, and had shut down the last source of supply for 84 prisoners. The response of some Corinth citizens was immediate as they took it upon themselves to support the prisoners, since all protests to the Justice Ministry were fruitless.

In the past few days, groups of Corinth residents have started collecting food as a small token of solidarity and respect to people who may be denied certain rights by the justice system.

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EUROBLOWN BREAKING….Greece heading for second stalemate as prisons run out of food [The Slog]


New opinion polls in this morning’s Greek press have New Democracy and Syriza still way ahead, and Pasok stuck at slightly above its vote last time.

The figures look like this:

5 ND 23,4%, SYRIZA 22,1%, PASOK 13,5%, INDGR 7,4%, ΚΚΕ 5,9%, DEMLEFT 5,1%, Neo Nazis 4,2%.

Still, Berlin-am-Brussels can take some cold comfort in that 54,2% of respondents say the country should ‘accept implementation of the bailout schedules’ as a precondition in order to stay in the eurozone. This does, however, give the lie to German tabloid hysterics insisting that the Greeks want it every which way.

But the obvious news in bold black type is that Athens will be without any clear sight of a ruling Coalition on June 18th. Although the way things are going, byt then the whole exercise might by academic anyway: I’m not usually a great supporter of non-political prisoners’ rights, but amidst the deepening Greek crisis, the State budget for many prisons has shrunk to a bare minimum. Hundreds of detainees are malnourished, the Greek newspaper Proto Thema reveals this morning.

At the prison in Corinth, food supplies have stopped completely, so their charges are about to starve say prison staff,…

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