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On July 08 2015 02:02 Gorsameth wrote:Show nested quote +On July 08 2015 01:57 Wolfstan wrote:
Why is letting Greece just leave the euro and get no more money not the primary option? All these "negotiations" seem rather fruitless. Basically all of the worthwhile people and young talent have already left Greece for better opportunities and markets. They can certainly figure it out because there is very little way to go up after an exit. Because the Eurozone politicians believe that the Euro should be an inviolable union, a union that can never be broken. That is why when they wrote the agreements they did not add a clause that actually allows you to leave the Eurozone. Of course reality doesn't work that way, you want to be able to kick out a member state that actively sabotages your union.
Can they kick the private banks out that lent Greece the money when they totally shouldn't have? Or are they fine like Goldman Sachs?
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On July 08 2015 01:42 disciple wrote:
Correct me if I'm wrong but the largest part of greeks debt in 2010 was to private entities. With the restructuring of the debt IMF and ECB essentially bailed all private banks cause the money that was lent to Greece was by and large used to to cover the debts to them. Its kinda like being sent a debt collector to break your knees and burn your house if you dont pay up cause the guy that gave the money to begin with has no laverage to get it back.
Something like that. In 2010, it was around 110 Billion Euros of Greek Debt, with a majority held by French Banks.
Now it's 2015 and the "total" debt is around 240 Billion Euros, though closer to 330 Billion if you take into account the Target2 account debt.
In 2010, it was a political decision that the Union couldn't be broke. (The total value is all of 2 months of the current ECB QE, so it's not huge money as far as the big players are concerned.) In 2015, it's a brutal economic reality that's going to cost 3 times as much. Oh, and China seems headed into a recession as well.
Economics can only run on fantasy for so long. Eventually, you have to "pay the piper". That day is coming soon, but knowing European Politicians, they'll be a week late and 100 over budget.
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On July 08 2015 02:14 Plansix wrote:Show nested quote +On July 08 2015 02:02 Gorsameth wrote:On July 08 2015 01:57 Wolfstan wrote:
Why is letting Greece just leave the euro and get no more money not the primary option? All these "negotiations" seem rather fruitless. Basically all of the worthwhile people and young talent have already left Greece for better opportunities and markets. They can certainly figure it out because there is very little way to go up after an exit. Because the Eurozone politicians believe that the Euro should be an inviolable union, a union that can never be broken. That is why when they wrote the agreements they did not add a clause that actually allows you to leave the Eurozone. Of course reality doesn't work that way, you want to be able to kick out a member state that actively sabotages your union. Can they kick the private banks out that lent Greece the money when they totally shouldn't have? Or are they fine like Goldman Sachs?
I believe the head of the division that would have overseen that Debt Swaps that Greece used to hide their budget shortfall is a man by the name of Mario Draghi. Heard of him?
I'm not one to dip into "the bankers are an evil cabal out to rule the world" stuff, but there are times it's hard not to think it might actually be the truth. Especially when the idiots are acting like it. (In reality, the bankers are power-hungry, greedy and social butterflies. But they're also extremely short-sighted in their planning. But the one place they haven't been in the last 80 years is buying influence with Politicians. Which is really why no one trusts them.)
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Oh, and just to "get ahead of the curve", the next country to watch out for is Italy. For as bad of shape as Spain is in at the moment, they have a lot to room to grow out of it, given they can keep things stable. "Stable" and Italy rarely belong in the same sentence.
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On July 08 2015 02:14 Plansix wrote:Show nested quote +On July 08 2015 02:02 Gorsameth wrote:On July 08 2015 01:57 Wolfstan wrote:
Why is letting Greece just leave the euro and get no more money not the primary option? All these "negotiations" seem rather fruitless. Basically all of the worthwhile people and young talent have already left Greece for better opportunities and markets. They can certainly figure it out because there is very little way to go up after an exit. Because the Eurozone politicians believe that the Euro should be an inviolable union, a union that can never be broken. That is why when they wrote the agreements they did not add a clause that actually allows you to leave the Eurozone. Of course reality doesn't work that way, you want to be able to kick out a member state that actively sabotages your union. Can they kick the private banks out that lent Greece the money when they totally shouldn't have? Or are they fine like Goldman Sachs?
You honestly think that banks like Deutsche Bank, ING, Santander and BNP Paribas are any less untouchable in their respective countries than Goldman Sachs is in the US? They're all "too big to fail" and they know it. Honestly, I really liked the solution that the Netherlands had for when Fortis was about to fail: instead of bailing out the bank, they just bought the whole thing out. There were lawsuits from shareholders that they underpayed and it was a fraud, but in the end, the shareholders had to suck it up: their choices were to get pennies on the dollar because Fortis was about to declare bankrupcy, or whatever price the Dutch and Belgian governments agreed on.
Now ABN Amro (the Dutch part of Fortis) is pretty healthy as far as banks go, and the Dutch government is looking to sell it again, hopefully costing the tax payers nothing (in the long term).
Of course, what I would really have liked to see happen in this case is for all the management to be replaced due to greed, but I guess that everybody who gets put in a position to run a bank is greedy, and the best you can hope for is competence (the current head, Gerrit Zalm, is that: competent and greedy).
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On July 08 2015 02:14 Plansix wrote:Show nested quote +On July 08 2015 02:02 Gorsameth wrote:On July 08 2015 01:57 Wolfstan wrote:
Why is letting Greece just leave the euro and get no more money not the primary option? All these "negotiations" seem rather fruitless. Basically all of the worthwhile people and young talent have already left Greece for better opportunities and markets. They can certainly figure it out because there is very little way to go up after an exit. Because the Eurozone politicians believe that the Euro should be an inviolable union, a union that can never be broken. That is why when they wrote the agreements they did not add a clause that actually allows you to leave the Eurozone. Of course reality doesn't work that way, you want to be able to kick out a member state that actively sabotages your union. Can they kick the private banks out that lent Greece the money when they totally shouldn't have? Or are they fine like Goldman Sachs?
This is foremost a banking crisis and the end game of all this is to bail out the banks while letting others pay for it.
During 2007 the banks lends money to people who could not repay them, in USA the most common case is banks vs householders and in EU it's German banks vs Greece.
This in itself is not a problem...until the EU banks decided to leverage their assets 40 to 1, basically they allowed borrowing 40 times what they actually had coverage for. This in turn changed the banks BNP footprint; all the banks in USA has around 80% of the annual GDP while banks of EU almost has 600% of EU annual GDP, France, Germany and UK banks alone has a footprint that is twice the GDP of the EU. What this means is that the banks are 'too big to fail', add to this that the banks are depended on each other, if one smaller bank defaults its likely the other bigger banks defaults as well.
And this is what these meetings are all about, the banking system is still a piece of shit and unstable as hell and everyone knows it so we have to shuffle all the cash we can to stabilize it but since the banks are so damn big we have to save up on everything else. The only reason for as why all the meetings regarding Greece, which economy wise is like comparing USA with the economy of the state of Ohio, is that The financial system is shit and has billions upon billions of so called "none performance loans" and they don't know where the hell they are since banks don't want to tell nor knows what they are doing.
If Greece defaults (Read the banks in greece because they dont actually give a shit about the overall health of Greece's economy or its people in general, as you should be aware of right about now) then there is a chance that those "none performance loans" which was created by the banks 40 to 1 leverage might come out of hiding somewhere else, maybe in the German banks, or perhaps in France? Who the fuck knows really.
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Greece's referendum in a few sentences.
You go to a restaurant with friends. Eat and drink like a mofo. Then, you ask your mates if you should pay the bill. :D
I mean who buys Greece's crap? You can't say no to reforms and keep overspending. It's Greece's fault and investors shouldn't have given them that much money or should stop now. Maybe the single currency is also bad.
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That's a terrible analogy.
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There is something around $900 Trillion in Derivatives. All of it is utterly interconnected. If a big piece goes, you start having small banks in small African countries suddenly unable to complete cross-border USD-based transactions because intermediaries suddenly got blown up. The derivatives market is the truly scare problem.
Which brings up an issue that's always bugged me. A few years ago, we'd have called them "Black Helicopter"-types: the "conspiracy under every rock" type of people. The problem is they got onto the Fractional Reserve Banking system ages ago, so you really can't talk about the epic disaster it's going to cause because the whack-jobs have been screaming about it for years. Europe is going to get harder hit by the problem of Bank credit creation than the USA is looking at, currently, but it's still insane and the disaster is going to take another decade or more to play out.
The USA still has a fairly massive "shadow" housing market of bank-owned but not being sold housing. There's some fascinating stories about people still living in their houses that were foreclosed in 2009. I'd hate to see what the true balance sheets of the big European banks actually look like right now.
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People always make terrible analogies when it comes to debt of any type. It’s always the borrowers fault because responsible lending is a myth. And even then, it’s clearly not the banks problem because they aren’t poor. But we hate loan sharks, those are bad. Loan shark bad, banks good.
On July 08 2015 03:32 Taf the Ghost wrote:
The USA still has a fairly massive "shadow" housing market of bank-owned but not being sold housing. There's some fascinating stories about people still living in their houses that were foreclosed in 2009. I'd hate to see what the true balance sheets of the big European banks actually look like right now.
Its not as common as you think, but it exists. It only happens when ownership of the loan is transferred and one bank just doesn't notice it owns a property. Luckily taxes tend to solve that problem since they don't care. The main shadow market is loans that are in default that they haven't foreclosed on, but those are few and far between. Most of them get modified because foreclosing on them after such a long period of default isn't reasonable.
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If you are a lender.. and you keep lending money to somebody with a 450 credit rating.. that is on the lender.
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On July 08 2015 03:36 RCMDVA wrote:
If you are a lender.. and you keep lending money to somebody with a 450 credit rating.. that is on the lender.
Exactly, just quit lending money to Greece and write off the bad money. The lenders have had 7 years the control their exposure, just take the loss and get on with business.
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I haven't seen any explanation suited to someone of my very limited knowledge; Could someone explain how Greece ended up in this situation to begin with?
Who is to blame and why? (Obviously this depends on who you ask, but I'm interested in any some what easily understood interpretations)
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On July 08 2015 04:38 nkr wrote:
I haven't seen any explanation suited to someone of my very limited knowledge; Could someone explain how Greece ended up in this situation to begin with?
Who is to blame and why? (Obviously this depends on who you ask, but I'm interested in any some what easily understood interpretations)
I wrote this literally one page back:
On July 08 2015 01:42 disciple wrote:
Correct me if I'm wrong but the largest part of greeks debt in 2010 was to private entities. With the restructuring of the debt IMF and ECB essentially bailed all private banks cause the money that was lent to Greece was by and large used to to cover the debts to them. Its kinda like being sent a debt collector to break your knees and burn your house if you dont pay up cause the guy that gave the money to begin with has no laverage to get it back.
Here: the Greece crisis in a nutshell:
Look at it this way: five years ago, the banks were about to send a debt collector to break Greece's knees and burn its house (because Greece was about to default on those loans). So the EU stepped in and said: "wait! we can't have this! don't break Greece's legs! We will help!" and bailed out Greece by paying off their debts (and negotiating a haircut with the banks). In return, Greece did some reforms. However, the whole economic situation didn't improve as much as was hoped (it was a pipe dream that the economy would improve enough), and now, 5 years later, Greece is about to default to their new sugardaddy, the EU (and is already late with their payment to the IMF).
In all cases, the tax payer on the street + Show Spoiler [to clarify] + the street in Germany, Italy, France. etc. The tax payer in Greek is already royally fucked + Show Spoiler [joke] +insofar as there are taxpayers in Greece! *chortle*
Best case scenario for everybody: a new agreement is reached, and between debt relief and restructuring, most of the money will come back in about 50 years or so, assuming the Greek economy manages to recover enough to start paying back the loans.
The current problem is that the EU ministers have 0 trust in the Greek government to perform the necessary reforms, and the Greek government has 0 trust in the EU that they won't get shamelessly exploited, lose all their autonomy and be a virtual slave to the Troika for the foreseeable future. Neither side will accept that everybody is trying to find a workable solution, and they especially don't agree on what a workable solution looks like.
And, imho, it doesn't help at all that Tsipras is an incompetent twat.
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If what you want to know is why Greece was allowed to borrow all that money from all those banks in the first place, well, then it gets really complicated. But the simple version is that the banks gambled.
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On July 08 2015 00:27 CuddlyCuteKitten wrote:
The proper way to bail out banks is to do it when required and take their stocks when doing it so you nationalize them. Then wait 5-10 years and sell them part by part to get maximum refund. Sweden did that in the 90s.
Its to late for that now because they are already out. But what France and Germany could do is to make a special bank tax that take a % of stock divends or profit from stock sales from the concerned banks untill they get their money back. But it wont happen.
It still doesnt change that Greece needs reforms.
That's what the US did for AIG, then the former chairman tried to sue the government lol
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Thanks for your response. But how come Greece ended up with this huge debt to begin with? Was it all down to the financial crisis of 200X? I get the feeling that Greece are very "entitled" and that they feel "cheated" somehow, but how can that be unless they themselves didn't bring forth the situation they find themselves in? I think this part is what confuses me the most.
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9071 Posts
How is it a gamble if the current situation is precisly why such loans by privite banks are risk-free?
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The biggest scandal in the whole Greece situation was about 3 years back.
One institution of the greek government had a cds (credit defauilt swap) on greek bonds to cover themselves incase Greece would default. Just before the euro crisis broke out in Greece this cds was transferd from this institution to a private entity. After the crisis broke out the cds rose immensely and the government institute had no protection anymore.
Will see if can find the full story,it barely made the news off course. But these are the deals that the bankers are making for the greater good,and this is only the top of the iceberg,as plansix no doubt knows.
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On July 08 2015 05:09 nkr wrote:
Thanks for your response. But how come Greece ended up with this huge debt to begin with? Was it all down to the financial crisis of 200X? I get the feeling that Greece are very "entitled" and that they feel "cheated" somehow, but how can that be unless they themselves didn't bring forth the situation they find themselves in? I think this part is what confuses me the most.
They were allowed to borrow to much money and continued to do so. This weird thing happens when you offer free money to nations, people and companies. They take it even if they might not be able to take it pay it back. Its why responsible lending is important, because the people handing out the funds are normally better equipped to determine if the borrower can pay it back.
Of course, if your a huge bank and you can just off load the risk onto a government or sell it to another lender, the system falls apart. See Country Wide Lending, Bank of America and FNMA for the ultimate example of stupid lending assuming that the government would pick up the tab.
On July 08 2015 05:12 disciple wrote:
How is it a gamble if the current situation is precisly why such loans by privite banks are risk-free?
Its a gamble for smaller banks, because they are small and are not able to make themselves invaluable to the economy. The key is to become so big that no one can tell you what to do, including the government and they can't let you fail because you will destroy the economy. Then focus on getting people elected that won't force you to break up. High finance in action.
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On July 08 2015 05:15 Plansix wrote:Show nested quote +On July 08 2015 05:09 nkr wrote:
Thanks for your response. But how come Greece ended up with this huge debt to begin with? Was it all down to the financial crisis of 200X? I get the feeling that Greece are very "entitled" and that they feel "cheated" somehow, but how can that be unless they themselves didn't bring forth the situation they find themselves in? I think this part is what confuses me the most. They were allowed to borrow to much money and continued to do so. This weird thing happens when you offer free money to nations, people and companies. They take it even if they might not be able to take it pay it back. Its why responsible lending is important, because the people handing out the funds are normally better equipped to determine if the borrower can pay it back. Of course, if your a huge bank and you can just off load the risk onto a government or sell it to another lender, the system falls apart. See Country Wide Lending, Bank of America and FNMA for the ultimate example of stupid lending assuming that the government would pick up the tab.
But why the outrage in Greece if this is the case? The country put itself in the mess, why is it that they feel others should pull them out of it? Is it literally because "well you shouldn't lend us money because we might not be able to pay it back'?
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EPT
