Why Everybody is So Afraid of Greece

[gunDriller]

Credit Derivatives.

Greece is a very small nation. Normally a Greek default would be like Orange County's bankruptcy 15 years ago. Everyone says, "I thought they were a wealthy county". In Greece's case, they have 100 tons of gold, the Parthenon and the Acropolis, and lots of beaches for German tourists.

If Greek citizens vote to leave the Euro-zone, that vote carries with it the possibility of default on Greek loans.

And that is the problem.

Those loans are carried by Italian, Spanish, French, and German banks. France & Germany can take that on the chin, but Italy and Spain can't.


Thanks to the black magic of credit derivatives, it's sort of like a "Thelma & Louise" moment, driving towards the edge of the cliff - except one of them backs out and decides not to go over the cliff.

In the dark. i.e. Most financial players don't know how close they are to the edge of the cliff. Probably some do.


Without credit derivatives, Greece could declare bankruptcy, but they'd still have 100 tons of gold - the kernel for a new Drachma - and they'd still have a draw for German & English tourists on holiday.

I lived in Greece for a year in the pre-Euro days, and it really was very nice.


I just hope that the EU is smart enough to let the Banksters take it on the chin, without endangering banking infrastructure that shipping, trade, & commerce rely on. And I know that such a hope is probably mis-placed.

All they have to do is "Go Iceland", except Iceland wasn't part of the EU.


Why is Greece leaving the Euro any much more significant than Iceland telling the Banksters to Stuff it ?

[Twisted Titan]

If the Greeks tell the Euro zone to pound sand and they live to tell the tale....all bets are off and the next nation state to want to run for the exits will be forced to stay in under threat of war and that will set the stage for massive upheavel unlike anything we have seen in over fifty plus years.

[Neuro]

The comparison between Iceland and Greece is a bit different. Yeah they are both two small countries, but Iceland have about 300.000 inhabitants, while Greece has 10 million. Iceland didn't default on its debt. It refused to take on the debts of the default banksters (about $6 Billions, which proved to be less as the markets recovered. Greece owes about €500 Billion, which they borrowed to finance their socialist system, and it's corrupt politicians and capitalists. No-one was complaining as long as the bonds kept getting bought with the aid of the smokes and mirrors of the Goldman Sachs financial wizards, who were payed handsomely as they deceived the world on Greece's debt problem. No-one cared, not even the lenders because they bought CDS's that supposedly were to protect them against a default. The weak point in the chain is that no-one can insure against a €500 Billion default. Theoretically of course the entire financial system could bear such a loss, if the loss was divided according to ability to bear the loss. But it isn't. There will be multiple defaults down the line of huge overextended financial institutions, and countries, and consequently more financial institutions in the chain reaction, following a Greek default, which really is the only realistic solution to Greece's situation, in a perfect world. But in a perfect world Greece wouldn't had fulfilled EU's demands on fiscal responsibility re entry to Euro (Neither would Spain, Portugal and Italy.

[gunDriller]

maybe Greece defaulting is that much different from Iceland defaulting.

i.e. a small-medium EU Country defaulting vs. a small non-EU country with large banks defaulting.

Greece' economy is not strong, so them leaving the EU doesn't sound so bad - like a team losing their weakest member.

i'm guessing "The Big Fear" is more related to counterparty risk and something about how close the whole shooting match is to the edge of the cliff.

the way they're acting, Greece is like a "cotter pin" in the mechanism of the EU - you take it out & the mechanicsm falls apart.


it's hard to tell what is smoke & what is fire. is it possible that TPTB are conjuring up an apparent reason for further nastiness - martial law, capital controls, war ?

maybe what they're afraid of is the precedent. Greece leaves & Spain & Italy have a much better argument for leaving. if Spain or Italy defaulted, that magnitude of default would crater Germany & the US.


maybe what they're afraid of is, having to pay out on the credit default insurance. a lot of large banks have sold credit default insurance, supposedly protecting other lenders from a Greek default. the shitehead banksters are afraid they'll have to make good on the insurance policy they have collected premiums on.

maybe that's why they're afraid - the revelation that those BS CDS derivatives are garbage would have some repercussions.

the "re-set" back to the pre-1990s credit-derivative-era would eliminate a big chunk of the "financial services" industry.

[undgrd]

I think the bankers are afraid of the precedent it sets. If a country like Greece...a European country, can leave the control structure of the EU. If they can thumb their nose at more than a millennium of established rules, they've lost.

Nobody cares about 300K Icelanders sitting on their collective frozen butts on the top of the world...nobody but us and the bankers anyway. However, Greece is a place people have visited...a place they've considered going...a place where their family lives or is from. In my opinion, Greece sticking it to the bankers and leaving the EU (both politically and financially) would break the control structure that's in place.

I do not think that will be done without a HUGE fight. Unfortunately for TPTB...I think the Greeks are up for it.

[gunDriller]

i wonder if Liebold played a role in the Greek vote.

making it look like the Greeks voted to pay back a bunch of banksters.

in order to keep the game going for another few months.


Greece's economy is 50% government controlled.

about as much as the US.

[Sparky]

I think the analogy of Greece as a "cotter pin" is a good one. Unlike Iceland, Greece is a domino.

[Silver Rocket Bitches!]

The difference is in the derivatives.