Greyerz: Greek Deal to Collapse Causing Trillions to be Printed

[Serpo]

Today Egon von Greyerz told King World News even if a Greek deal is announced, at some point it will collapse. Von Greyerz also said the consequences of the collapse will be massive. Egon von Greyerz is founder and managing partner at Matterhorn Asset Management out of Switzerland. Here is what von Greyerz had to say about what is taking place in Europe and how it will impact gold and silver: “Well, it’s ridiculous. Every few minutes we are seeing a different headline. One second Greece is being saved and the next second the deal is collapsing. Yesterday, for example, three UK banks signed up and that still only leads to 40% acceptance and one of the banks that signed on was Royal Bank of Scotland.”

Royal Bank of Scotland is a bankrupt bank that is owned by the British government. This is the bankrupt leading the bankrupt. It’s absolutely ridiculous. If this deal is happening now, it would be a miracle. It could happen, but at some point the deal will collapse anyway.


They are saying they have an agreement, but I don’t think they do. Therefore, if Greece collapses, whether it’s today or whether it’s in a few weeks time, the consequences are massive.



It’s not just the $200 billion, we are talking about consequences for the other countries in southern Europe, Italy, Spain and Portugal....





Then, on top of that you would have all of the CDS’s and that’s another few trillion euros because then it would be a proper default. So, whether they give the impression they have a deal in the next day or so is irrelevant, this deal will collapse over time and it will lead to much bigger problems.



As things head south you have the whole of the European debt situation that will unravel and the ECB will have to save a lot of other countries. Of course, the US would also be involved through a lot of the CDS’s and there will be a few trillion dollars the US will need to come in and support. So, whether the money printing starts this week or whether it starts in a few weeks time, it will start.



Hyperinflation is very likely to happen and the experts you have on the show are some of the few people that understand this scenario. I’m absolutely convinced we will be right. The world is not expecting this. The world is expecting better times. Nothing is getter better. It’s actually getting worse every day, Eric.”



When asked about gold, von Greyerz responded, “I think the correction is over and I believe we are going to have a swift move up now. It was a shock for a day (last week), but if you look at the trend from the beginning of the year it’s up.”



When asked about silver specifically, von Greyerz stated, “Silver looks great right here. Silver has resistance and we almost hit it this morning in Europe at around $34.50. Once we get through that area $34.50 to $35, I think we will have a very swift move up to $40 and beyond.”
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/3/8_Greyerz__Greek_Deal_to_Collapse_Causing_Trillion s_to_be_Printed.html

[mamboni]

It might be well to remind ourselves that despite the recent "correction" which was a blatant government-backed dumping on silver and gold longs, silver today is about 400% higher than it was in 2005 and gold is up about 300% during the same period. US stocks are actually down(!), especially when corrected for inflation. We all know that anyone in RE has gotten slaughtered and the pain will not end for many years. And here we are waiting for the inevitable next leg up in the gold and silver bull run. Congrats to all of you smart enough to buy and hold these metals; and a single small sympathic tear for the millions of hapless dopes who will have what's left of their material wealth wiped out because they made the mistake of turning off their brains and putting their trust in government and the MSM talking heads.

[mick silver]

do you guys think that if greek was to collapse that the big banks of the world would take a loss ? are would they just take whats left of the people stuff from them to pay for this collapse ?

[DMac]

Greece is the AIG of Europe. SocGen is in for XXX billions, if not trillion + in CDS and other insurance based "financial products" (lol) tied to Greek debt.

[Sparky]

do you guys think that if greek was to collapse that the big banks of the world would take a loss ? are would they just take whats left of the people stuff from them to pay for this collapse ?
They are taking the loss as we speak, at about 70 cents on the dollar. It's really not that much money though, i.e. a few hundred billion dollars, which is what the U.S. borrows every few months.

The significance is the president set for when Portugal, Spain, and Italy reach the same point, which is a LOT more money. They are going to want their debt also forgiven at a 70% rate, which is what this whole Greek debt negotiation is all about.

[Serpo]

Banks would lose,countries would lose,currencies would lose ect ect but dont worry .....its only fiathttp://static.theurbn.com/wp-content/uploads/2011/08/dominos-falling.jpg

[mick silver]

so your telling me we can print are why out of this

[Serpo]

The interest rate on loans ,over time amounts to a lot of money.Banks can cut a loan in half, throw away the money and still come out smelling the roses.

What havnt they printed their way out of.........

.....still in the end it all back fires and they are left holding a charred mass of (im not sure what)

[Neuro]

The thing is even if Greece gets this massive write down, they will still continue to run deficits. They will still need to borrow more to finance their deficit, who in their right mind would borrow to them? And when they can't borrow they can't service their current debt... And the thing is that practically all major economies in the western world is in the same situation. The only difference is that they haven't defaulted yet, but for certain they will not be able to balance their budgets.

Yes ECB will keep the banks barely alive, with loans to keep them from defaulting from Greek debt, but they will be zombified, which means they can't extend credit to the other FU PIIGS. ECU will come to their rescue also, but the Greek deal sets the precedence, ECU gets promised to get everything back, the banks and other investors get a percentage, and the banks get further embalmed and entombed. They won't be able to run normal banking business iow extending business and personal credit and mortgages, not even to entities that most likely will be able to pay back. Grinding death of general economy awaits.

[Serpo]

Perhaps the whole world is bankrupt and if they can find a little more to borrow to service the loan the can ,can be kicked again......but the can is starting to look a little f#cked.;Dhttp://farm2.staticflickr.com/1044/3168225391_cf905a6642_z.jpg

[Silver Rocket Bitches!]

As long as there is confidence in the system, the system can be sustained. As soon as faith is lost in the dollar all hell breaks loose.

And the article is absolutely right, the world is not expecting this. Good times are promised to them by their elected officials. Just around the corner. Except soon we will turn the corner and find a brick wall.

[Serpo]

do you guys think that if greek was to collapse that the big banks of the world would take a loss ? are would they just take whats left of the people stuff from them to pay for this collapse ?

In order to avert a default, and in what will be the largest debt restructuring deal in recent history, investors who own bonds governed by Greek law, which covers 92% of bonds outstanding will incur a loss of as much as 75%, thereby erasing some 107 billion euros ($144 billion) of Greek debt from its total debt burden of 373 billion euros ($496 billion).
The losses of these bond holders which include banks, hedge funds, financial institutions and private investors may be used as a reminder to potential investors that holding sovereign debt is not necessarily a sure and safe thing. In 2006 Iraq imposed an 89% loss on its bondholders in 2005 investors lost 76.8%.
As far as I am concerned these investors do not deserve any sympathy at all, as they were consumed by greed and stupidity when they originally purchased this debt. At the time of purchasing they all thought that Greek bonds were a sure bet and an easy way to earn a high interest on their money. I can recall certain European bankers touting these bonds to their clients due their high returns. And, when I urged clients not to be tempted by these high yields and to rather invest in gold, their response implied I was being ridiculous because gold was a waste of time as it did not pay any interest. Two years ago, the gold price was around $1100 an ounce. Now, perhaps those investors will understand that investing is not only about seeking high yields.


http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=146867&sn=Detail&pid=102055

[Horn]

Grinding death of general economy awaits.

Which is what the gov lives off of.

[Serpo]

The Hundred-Billion-Euro Bomb

Euro-Zone Central Bank System Massively Imbalanced

By Stefan Kaiser (http://www.spiegel.de/extra/0,1518,769659,00.html)
http://cdn1.spiegel.de/images/image-319580-panoV9free-bied.jpghttp://www.spiegel.de/static/sys/v9/icons/ic_lupe.png (http://www.spiegel.de/international/europe/bild-818966-319580.html)
DPA
One economist called his counterpart Hans-Werner Sinn's analysis 'brilliant.'



More than a year ago, German economist Hans-Werner Sinn discovered a gigantic risk on the balance sheets of Germany's central bank. Were the euro zone to collapse, Bundesbank losses could be half a trillion euros -- more than one-and-a-half times the size of the country's annual budget.
http://www.spiegel.de/static/sys/v9/icons/i-button.jpg (http://www.spiegel.de/artikel/a-749184.html)

The crucial clue came from the same man whose signature once adorned the deutsche mark: Helmut Schlesinger, former president of Germany's central bank, the Bundesbank. He was the one who pointed Hans-Werner Sinn, an economist in Munich, in the direction of a strange entry in the Bundesbank's statistics: In late 2010, records showed claims on other euro-zone central banks totaling over €300 billion ($400 billion). Curious, Sinn began to dig deeper. What he found exceeded his worst expectations.


"In the beginning, all I had was this number, and I didn't really know what it meant," says Sinn, who is president of the Munich-based Ifo Institute for Economic Research. "The Bundesbank told me those were irrelevant balances. But that didn't reassure me." Sinn spoke with specialists at various central banks and with colleagues in his field. "Each person knew a little bit," Sinn explains, "and I had to fit the pieces of the puzzle together. It was real detective work."
After weeks of work, Sinn had assembled enough pieces to create a picture that would make any one shudder: Since the 2007 financial crisis, immense imbalances have formed within the otherwise harmless payment system that exists between the central banks of the 17 euro-zone member states. While Italy, Spain, Ireland, Portugal and Greece, all hit hard by the debt crisis, show deficits totaling over €600 billion, the claims owed the Bundesbank have climbed to €498 billion.
'Caught in a Trap'
As long as the monetary union continues to exist, this isn't a catastrophe. The money is virtual, created by central banks, and its existence doesn't mean that an equivalent amount is lacking elsewhere. But as soon as a country leaves the euro zone, or the currency union collapses entirely, things get critical.
"We're caught in a trap," Sinn says. "If the euro breaks apart, we're left with an outstanding balance of nearly €500 billion, owed by a system that no longer exists." That figure, €500 billion, is more than one and a half times Germany's annual federal budget.
This, though, is the worst-case scenario, and would only apply if the euro zone falls apart entirely. A far more realistic possibility is that one country, such as Greece, would leave the monetary union. In this case, all of the other euro-zone central banks would have to bear the Greek central bank's debt together. Germany's Bundesbank, in accordance with its share of the European Central Bank (ECB), would assume about 28 percent. With Greek debt at €108 billion, Germany's share would be approximately €30 billion.

http://cdn3.spiegel.de/images/image-324522-panoV9free-vcpm.jpghttp://www.spiegel.de/static/sys/v9/icons/ic_lupe.png (http://www.spiegel.de/international/europe/bild-818966-324522.html)
SPIEGEL ONLINE
The Bundesbank's claims are set off by massive debts in crisis-stricken euro-zone countries.


Sinn loves to be provocative. In this case, though, it seems he truly has serious concerns. Sitting at a restaurant in Berlin's government quarter with his laptop open on the table in front of him, he uses the tip of his coffee spoon to trace the yellow and blue lines that snake across the screen. These lines are meant to show the extent to which the euro zone has gone off track.

"This is dangerous," Sinn says, his eyes flashing. These outstanding balances owed by other central banks open Germany up to blackmail, he explains. "Now everyone knows we have to save the euro, at almost any cost." His thesis sounds dramatic, yet so far Sinn hasn't managed to get the general public interested in the problem, which is only slowly spreading beyond economic circles. He has made it into the major newspapers, but the mass-circulation tabloid Bild won't be publishing Sinn's discovery on its front page any time soon.
Sinn certainly isn't shy about making himself heard. He's a welcome guest on talk shows because he makes his case clearly and sums it up in pithy sound bites. But that approach doesn't work with Sinn's current subject, which is too complex for a talk show. Then there's the name of the payment system between the central banks -- "TARGET2" -- which sounds about as exciting as the title of an accounting seminar.


http://www.spiegel.de/international/europe/0,1518,818966,00.html

[Serpo]

Part 2: The Genesis of the Problem
In theory, the system ought to be as harmless as it sounds. TARGET2 is meant to help process the payment claims between central banks that result with every cross-border bank transfer within the monetary union. As long as the economy is in balance and goods and money are flowing in all directions, the balances always even back out. Even if a country imports more goods than it exports, it is generally able to make up the difference through capital inflow from abroad, keeping TARGET2 balances at or near zero. This was the case until the beginning of 2007.
Here's an example: A Greek business buys a truck from a German company. The Greek company's local bank in Thessaloniki transfers the payment for the truck to the German company's bank in Stuttgart. Because the payment is carried out through the two countries' central banks, this creates a liability on the part of Greece's central bank toward the ECB within the Target2 system, while the German Bundesbank now has a claim from the ECB for the same amount.
The balance evens out when money flows from Germany to Greece, as happened most years before the crisis: The commercial bank in Greece would borrow the money it needed for its loan to the Greek business, for example, from a German bank.
That, in itself, is a problem. Since countries such as Greece, Spain and Portugal have for years imported more than they exported, even before the crisis they relied on capital inflow from abroad to pay for the goods and services they bought. Germany, on the other hand, has consistently produced export surpluses, which means it has to export capital as well.
Such imbalances cause difficulties in the long term, even in good times. But in a financial crisis, they can potentially lead to catastrophe because the cash flow between banks suddenly falters. This is what has happened since 2007:



Banks in all of the euro zone countries have had to hold onto their money. They withdrew from supposedly unstable countries, and loans that expired were not renewed.
The fears of the wealthy also came into play: Concerned that their money might soon lose its value, they began to pull out of Greece, Ireland and Portugal, then later Spain and Italy as well. This left banks in those countries with a smaller pool of savings they could pass on as loans.
The result of all this was that Greece and the other countries in crisis no longer had enough money to fund all of their imports. If Greek banks wanted to offer further loans, for example to pay for the purchase of German or Dutch products, they had to borrow from their central bank.
The central bank, in turn, simply created money out of nothing, charging it to the entire euro zone as an outstanding claim within the TARGET2 system. "These countries simply pull money off the printing press," Sinn complains.


http://cdn1.spiegel.de/images/image-324530-panoV9free-jvwq.jpghttp://www.spiegel.de/static/sys/v9/icons/ic_lupe.png (http://www.spiegel.de/international/europe/bild-818966-324530.html)
SPIEGEL ONLINE
Bundesbank claims are rising -- as are the debts of crisis-stricken euro-zone countries.


Even worse, the central banks also grew increasingly lax in the collateral they required for loans they made to banks in their country. Whereas in the past they accepted only government bonds with top-level credit ratings, now they began to accept second and third-tier securities. This can be seen clearly in the statistics: Just between 2005 and 2010, the volume of securities accepted by central banks rose from €8 billion to €14 billion -- and has likely increased even more since then. Especially those banks in crisis countries, which are already reliant on their central banks, now submit even their worst securities. Greek banks, for example, have primarily their own country's sovereign bonds on their books. No one on the free market wants these securities, but the Greek central bank continues to accept them as collateral, issuing new money to the banks in exchange. "Private cash flow is replaced by public cash flow," Sinn explains.
This becomes dangerous if those securities ever need to be used, for example if Greece leaves the monetary union or declares bankruptcy. At that point, Greek bonds would be valueless, and the probability that Greece's central bank will be able to repay its debts to the euro system becomes miniscule.
'If Only One Person Says It, It Can't Be True'
At first, Sinn took a great deal of criticism for his beliefs. There was something of an outcry among economists the first time he published details of his thoughts in the Frankfurter Allgemeine Zeitung, partly because not all of those thoughts were as clearly formulated as they are in his most recent paper on the subject. He was exaggerating and artificially playing up the risks, other economists said. The Bundesbank itself also initially dismissed the divergent balances as more or less harmless. Sinn was essentially alone in his views.
"Everyone thought: If only one person says it, it can't be true," Sinn says. Still, the economist says, he never doubted his own interpretation of the facts. And by this point most of the critical voices have fallen silent.
"I spent two weeks looking into the subject," says one German economics professor. "Mr. Sinn is right. The analysis is brilliant." Others concede, though some through gritted teeth, that the risks of the TARGET2 balances do seem to be higher than they originally thought.
The ECB, meanwhile, has confirmed the principles behind Sinn's analysis, but draws considerably more innocuous conclusions, at least publicly. The fact that central bank funds within the euro system are distributed so unevenly, according to the ECB, actually helps promote stability, since financially solid banks even "in countries with financial strains" are able to satisfy their liquidity needs.
That statement only seems reassuring on first glance. In plain language, what it means is that commercial banks in crisis-stricken European countries are forced to rely on funds from their central banks because they can no longer get money anywhere else.
Eurobonds Would Help Solve the Problem
It is difficult to come up with ways to reduce risk without plunging the euro zone into chaos -- which is precisely what would happen if central banks in crisis countries were forced to pay back their debts overnight. Sinn suggests tightening regulations on the collateral banks use to borrow money from central banks. In the medium term, he says, central banks could be forced to regularly settle their liabilities with valuable securities, which is common practice in the Federal Reserve System in the US.
Another option for reducing risk in central banks would be to shift aid from monetary policy to fiscal policy, for example through the introduction of eurobonds. That, though, is a route Sinn would rather not consider. Instead, he advocates tougher methods.
"The rules need to be stricter," he says. "Anybody who can't comply with them doesn't belong in the euro zone." Sinn, as ever, the provacateur.

Translated from the German by Ella Ornstein

[mick silver]

As long as there is confidence in the system, the system can be sustained. As soon as faith is lost in the dollar all hell breaks loose.

And the article is absolutely right, the world is not expecting this. Good times are promised to them by their elected officials. Just around the corner. Except soon we will turn the corner and find a brick wall.
didnt a cat or as bird are was it a tiger that said that ..................As long as there is confidence in the system, the system can be sustained

[mamboni]

This chart is the epitomy of spinning out of control at ever increasing speed. There is no solution to the EURO crisis because it's design is fatally flawed. They can print over the problem and postpone the inevitable only as long as Europe does not boil. When millions of people who've lost everything and have nothing to lose except their freedom and sovereignty finally say enough is enough then it's game over. The Greeks have shut down their economy and tax revenues have collapsed. Nothing can prevent an eventual Greek Bond default.

http://cdn1.spiegel.de/images/image-324530-galleryV9-jvwq.jpg