Is Greece About to Default?

Answer: Most Probably

From Bloomberg:

“Chancellor Angela Merkel’s government is preparing plans to shore up German banks in the event that Greece fails to meet the terms of its aid package and defaults, three coalition officials said.

The emergency plan involves measures to help banks and insurers that face a possible 50 percent loss on their Greek bonds if the next tranche of Greece’s bailout is withheld, said the people, who spoke on condition of anonymity because the deliberations are being held in private. The successor to the German government’s bank-rescue fund introduced in 2008 might be enrolled to help recapitalize the banks, one of the people said.

The existence of a “Plan B” underscores German concerns that Greece’s failure to stick to budget-cutting targets threatens European efforts to tame the debt crisis rattling the euro. German lawmakers stepped up their criticism of Greece this week, threatening to withhold aid unless it meets the terms of its austerity package, after an international mission to Athens suspended its report on the country’s progress.”

Meanwhile, global monetary players step up their calls for more global monetary easing. First, the Federal Reserve’s John Williams:

The global financial system is experiencing great stress as it adapts to the new, post-crisis rules of the game.  Those new rules are both explicit and implicit.  They call for more capital, reduced leverage, lower risk appetites, more thorough supervision, and stronger regulation, at both the systemic and individual institution levels.  In this environment, open dialog is all the more important as we collectively reach a common understanding of how the new rules should work in practice.

Post-crisis? Really? With Europe on the edge, America slipping back into recession, this is what the “post-crisis” is supposed to look like?

Next up, Josef Ackermann of Deutsche Bank:

Investors are not only asking themselves whether those responsible can summon the necessary willpower to overcome this crisis, but increasingly also whether enough time remains and whether they have the needed resources available.

And finally the Federal Reserve’s Charlie Evans:

Imagine that inflation was running at 5 percent against our inflation objective of 2 percent. Is there a doubt that any central banker worth their salt would be reacting strongly to fight this high inflation rate? No, there isn’t any doubt. They would be acting as if their hair was on fire. We should be similarly energized about improving conditions in the labor market.

And as we speak, the DJIA has slumped 2.5% on fears of Greek contagion. Undoubtedly, policy makers will be looking to stabilise the market. This is absolutely the most anti-capitalist thing imaginable: for capitalism to work, good ideas must be rewarded, and bad ideas, risky and fragile systems must break. For far too long bad decisions, bad management and dangerous corporate behaviour has been rewarded with taxpayer bailouts, crony capitalism, and subsidies. And quite simply, until those practices are rewarded with utter abject failure we are totally fucked. Which brings us to one of the very few sane things I have read today, from Nassim Taleb:

The triplet. Three bankruptcies that would save the world from fragility: 1) Goldman Sachs, 2) Harvard University, 3) the New York Times.

7 thoughts on “Is Greece About to Default?

  1. Dear Aziz, I think Greece, has to confront it’s Karma, for sending Socrates to his death.

    I thought I would ask the question on the Federal Reserves website for feedback. Just for a laugh. See the response. After reading the information, which is typical government information, you would think, in these trying times, that they would provide information to assist genuinely concerned citizens allay their fears. When the %@3! hits the proverbial fan, citizens will want answers. There will be plenty of false prophets with Microphones. My family was in Ukraine pre WW2, and I understand, through my Grandmother’s stories, the Jewish Pogroms. (Even though not Jewish) See Fed response below:

    Dear Mr. Rojek: Thank you for your recent correspondence and your interesting questions about the responsibilities of the Federal Reserve. For information about the responsibilities and operations of the Federal Reserve, please see the “Current FAQs” section on the Board’s website, under the heading “About the Fed.” Here is the link: You may also wish to review the Board’s publication “The Federal Reserve System: Purposes and Functions.” This publication provides a detailed look at the structure, responsibilities, and operations of the Federal Reserve System. The URL to access this publication is Again, thank you for writing. I hope this information is helpful. Sincerely, JPDBoard Staff

    Dear Honourable Board Members, I have studied Economics all my life, and after reading the response of other internet users, regarding the economy, I am really concerned. I don’t know what to believe. Many say that the Reserve Bank is Controlled by Zionist interests. I am concerned that this chatter on the internet is misleading people. Others say that there is not any gold in the Reserve’s vaults, that wealthy Jewish families guide the Fed etc etc. What is the truth? Please direct me to a web page on the Reserve sight that debunks these myths. I want to be able to show the link everytime I read a crazy spouting conspiracy theories. Please ensure that the information has credible sources and proof, so they crazies don’t imagine more conspiracies!

  2. Note the best line on the site.

    “The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. The stock may not be sold, traded, or pledged as security for a loan; dividends are, by law, 6 percent per year.”

    6 Percent! That is a risk free return if I ever saw one!

    If the Fed goes bust, thereby absorbing capital, I assume the Member banks lose their Capital?

    Note the Government can change statute at any time. I hope the USA government has enough POLITICAL CAPITAL

  3. Pingback: Is Greece About to Default? » Greece on WEB

  4. Pingback: Will China Bail Out the World? « azizonomics

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s