The secret plot to derail the Greek bailout

Warning:  This is a very long post but a very important one to read...  

** To break up a potentially long read, we have injected photos of butterflies, both because they are lovely to look at and they symbolize 're-birth' which is the grande theme of this post.  We talk of Greece trying to prevent default... if it was a caterpillar, it would be like trying to prevent chrysalis.

So we begin..  

There are two ways a corporation or nation defaults..

1)  The corporation or nation openly declares bankruptcy

2)  The corporation or nation does everything humanly possible to avoid it but powerful forces behind the scenes ensures it happens to their benefit

Greece should have taken option #1, for revenge sake

Instead in spite of public pronouncements and agreements to the contrary, they are being forced into option #2, and to be honest, we are unsure if the Greek leadership, much less the people even know or understand this...

We at A&G have done much research and have written extensively on this topic, not because our focus is usually Greek concerns or possess any ethnic or emotional ties to the country.    We cover it because we see the default at minimum as the first 'Victory' in the war against banking and finance; the first Real and Genuine pain the financial elites will feel since September, 2008.   

And when it comes, it will be long overdue.

As we said previously, we've done much study and there are two questions we couldn't fully understand in this geopolitical chess game-  1) Why was an agreement made in Brussels on Sunday night when many of the involved parties truly want Greece to default and be gone from the euro?, and 2)  What role is the US playing, especially financially in this kabuki, especially since everyone knows the US bails out the world?

After reading an array of sources, we feel we finally have a much better understanding of the complex theater being enacted before our eyes and can piece together a timeline as to what has happened recently and what is going to occur over the next four weeks (Greece must pay its next installment of debts by March 20th- that is not a flexible date)

On Monday, January 16th, Presidential staff and Fed advisers convened with a dozen or more top Wall Street bankers. Its purpose was to brief a select group on the White House and Geithner approved operation to amputate the eurozone’s obviously gangrenous Greek leg.

Just 24 hours later, a remarkable undercover bailout slush fund was set up for the use of the ECB under Mario Draghi. On that day, the financial website Wealth Wire posted a piece suggesting the Fed was ‘up to something mysterious', and Jonathon Trugman of the New York Post’s financial desk wrote this: ‘Essentially, we just bailed out Europe’s banking system with the full faith and credit of the United States’.

Subsequently, a former Fed official told the Wall Street Journal that the Reserve was indeed bailing out Europe by operating in the shadows – aka a loan masquerading as a currency swap.

Former Vice President of the Federal Reserve bank of Dallas, Gerald O’Driscoll told the Journal:

“The Fed is using what is termed a “temporary U.S. dollar liquidity swap arrangement” with the European Central Bank (ECB).  Simply put, the Fed trades or “swaps” dollars for euros. The Fed is compensated by payment of an interest rate (currently 50 basis points, or one-half of 1%) above the overnight index swap rate. The ECB, which guarantees to return the dollars at an exchange rate fixed at the time the original swap is made, then lends the dollars to European banks of its choosing.

The two central banks [ECB and US] are engaging in this roundabout procedure because each needs a fig leaf. The Fed was embarrassed by the revelations of its prior largess with foreign banks. It does not want the debt of foreign banks on its books. A currency swap with the ECB is not technically a loan.”

Well, swap or loan, it all went into the eurobank prop-up operation.  During the period following that transfer, the ECB lent $483bn in various amounts to just over 500 banks in the eurozone. 

So let's stop here and refresh what's happened so far-  US taxpayer $$ has been used once again to bailout Europe's banks and financial institutions.  If you ever wonder how the US has so much pull and sway in the UN and in economic, military and geopolitical affairs, perhaps this type of 'deal' answers it.

Let's continue..

That swap i.e. 'loan' deal was outlined to the key Wall St players on January 16th. In a nutshell, it was “We bale out the eurobanks for Mario, and in return they [the EU States] build a firewall around Greece”. It was the start of what became known as ‘amputate and cauterise’. Goldman Sachs played a pivotal role in the session.

The US view is this: Greece must default outside the euro, and become a leper.  Secretary Geithner thinks the Europeans don’t have the money to make the banks ultra-safe…and that means an immediate contagion blowback to the US, with disastrous consequences. (It also means Obama's re-election chances are severely hindered if the US experiences anything close to another 'Lehman') 

So we, the US, must covertly help the ECB render the eurobanks safe – and in return, they need to step up to the plate by leveraging whatever firepower they need to ensure the whole mess stops at Greece.

Simple.

The key players at this meeting were Timothy Geithner, Goldman Sachs' Lloyd Blankfein, a tight group of White House Obamites, Ben Bernanke (at “a safe distance”), Mario Draghi, and IMF boss Christine Lagarde.  The President as well as Secretary of State, Hillary Clinton were fully aware of the meeting but neither attended.

As a consequence, from this point onwards Christine Lagarde began to play serious hardball about the need for a massive firewall investment by EU member States. Concurrently, Secretary Clinton applied every ounce of available pressure to the Sino-Japanese credit line as a potential further source of bricks in the wall.

Clinton’s State Department seems to have had some degree of success. Less so Lagarde: she has come up hard against Berlin’s refusal to expose Germany further.

The view in the Fed and Washington is that the Europeans are welching on the deal which is peculiar since really they never had Berlin on board in the first place.  Germany does not want to expose themselves to even greater debt, and recently their legislative body enacted legislation prohibiting it.  At the recent G-20 meeting, Lagarde has threatened to pull funding for the Greek bailout unless the IMF gets their way and a 750bil euro firewall is created.

So that's were things stand today, February 24th.  Everyone wants a Greek default except for the 'chess piece' in the game that should have wanted it all along, and thus now is reduced its significance to that of scapegoat 'pawn' -- Greece.

And in case you think we didn't provide enough evidence to explain why Greece will be defaulting soon (even if it doesn't want to), here's a few more reasons:

* The credit rating agency S&P today joined Fitch and Credit Suisse in seeing the Greek Bailout as akin to 'default'.  From appearances, it seems all will call default one second after the bond swap officially takes place. Whether that triggers CDS (credit default swaps) remains to be seen...

* The Greek consitutional change demanded by the Troika (to hierachise debt before other expenditure) will not be possible by the Greek bailout closure date. And they knew that all along.

* European creditor countries are demanding 38 specific changes in Greek tax, spending and wage policies by the end of this month and have laid out extra reforms that amount to micromanaging the country’s government for two years, according to the Financial Times. There is no way the Greeks will stand for that either.  The program is being set up to fail, as many of these conditions will be impossible to achieve

* In an interview with the Wall Street Journal, Mario Draghi’s support for the deal remains understated bordering on tepid: he suggested that the sceptical market response to Tuesday’s rescue deal suggested many doubted Athens would follow through on a promised austerity cure. “It’s hard to say if the crisis is over,” he warned.

* Commerzbank AG Chief Executive Martin Blessing yesterday said of the Brussels deal, “The participation in the haircut is as voluntary as a confession during the Spanish Inquisition”.

In summary:  If Greece does not default by March 20th, it will be an outright shock to A&G since so many major players in the secret contagion 'game' are working very hard behind the scenes to make sure it does happens.  The goal is to cut off the financial bleeding at Greece before spreading to bigger and more important nations that require too much funding to bail, and because many believe they will be insulated by any financial blowback, thus the potential for a financial tsunami turning into a ripple.   

We believe they are wrong on both accounts.

Grecian Spring

Well the market is down today... -135pts as of 2:15p est..

Would be nice to see a four-digit decline; a '1' or '2' in front of that '135' but still, considering the Dow has been going up for all of 2012 without any rationale or reason beyond empty optimism and the Hunger to profit, we'll celebrate any triple digit down days.

Yesterday we demonstrated once again how deeply uninformed Americans are to the realities going on in Greece.  But as much as blame could be placed on the average person for not caring about anything or anyone outside of the immediate sphere of 'self',  it is also the fault of American media for intentionally doing a piss-poor job to accurately reporting on how troublesome the economic rots of the Eurozone are.

I guess media is incapable of serving corporate master and Truth equally.

Ultimately the economic and political demise of Greece will affect us all, so people better start paying attention to it as if it was local news or your favorite sports team, and not some profit-making nuisance or distant problem far, far away somewhere in the Mediterranean.

Here's some of the latest news and pieces of interest from Greece from today:

--  Greek Bailout "unagreed" 24 hrs after it was agreed upon.  The leader of the rightwing Popular Orthodox Rally (LAOS), Georgios Karatzaferis woke up to reality that the cuts would destroy what's left of Greece and pulled back support.  The Euro's value vs the Dollar plunges...  Their political party does not have enough votes in Parliament to derail the 25% reduction in minimum wage, 15,000 job cuts and other austerity sacrifices outright but let's just say their point of view is becoming more and more prevailing, especially as there's April elections to consider.

--  Greek Prime Minister Lucas Papademos has pledged to do "everything necessary" to rescue the €130bn bail-out package for Greece, and said that any senior members of Government who opposed him would be ousted.   Since at least 3 members of the coalition have resigned in protest, maybe ousters aren't necessary.

Isn't democracy just Wonderful?   Anyone who disagrees with your leadership or policy decisions, you simply 'oust'.  Of course Pamademos is a technocrat and wasn't elected by the people (he's simply a banker working for the EU and financial interests to ensure they get their money by all means necessary)

Papademos also said if Greece defaulted, there'd be 'uncontrolled chaos'.  Seems he forgot to finish the sentence... 'for the financial sector'.  And if there is chaos in Greece and the rest of the world, it will be due in large measure because the powers that be refused to make contingencies.  To the stubborn bastards who control global finance there never is nor was an Option B, so any chaos will be intentionally created to scare future debtors from defaulting.

-- Though more symbolic than reality, The Federation of Greek Police have threatened to arrest EU/IMF officials, accusing them, in a formal letter, of "...blackmail, covertly abolishing or eroding democracy and national sovereignty". They also wrote, ""Since you are continuing this destructive policy, we warn you that you cannot make us fight against our brothers. We refuse to stand against our parents, our brothers, our children or any citizen who protests and demands a change of policy."

There will come a point when the police stop fighting the protesters and join the struggle- then all bets are off, even across the Atlantic.  Hope you have some cash in a sock or something because your local bank will be on government-imposed 'holiday' for a few days to prevent a panic run.

The Greek situation also reminds me of the situation in Wisconsin last February involving that coward Governor Walker, who is in the pocket of the Tea Party controlled Koch Brothers.  He wanted to destroy the unions by making it illegal to collective bargain, so he targeted teachers, firefighters, everyday workers, etc..  The one union that was exempt from the law-- the police union.  That's what all third-world and third-rate leaders do- essentially bribe the police because without them, the leaders are powerless and emasculate.

Well now you're caught up to speed...

If you read this blog, we know you are informed and care.  But your friends... your family... your neighbors are still in a complete state of utter ignorance when it comes to the economic storm clouds coming from Greece and the rest of the Euro.   I could express a thousands analogies but I will only do one:

Due to globalization and banking interdependence, all the nations of the world are economically intertwined, like lights on a string.  When one bulb blows, it will affect all others, no matter how seemingly far away it appears on the string.

Random Musings- Greece, America & apathy

~ A pie chart breakdown of where Greece's bailout money goes.  Only 19 cents on the dollar, or rather euro actually go back to the Grecian economy i.e. its populace.

No one respects deadlines anymore...

Frustrating... just frustrating..

The big news out of Greece over the weekend was that its leaders had just 24 hours to work out a deal with its EU, ECB & IMF creditors that would complete the selling of their nation and souls to their creditors.

Only 24 hours for Greece's leaders to agree to "the minimum wage be cut to less than 600 euros ($790) a month ($4.94/hr) and that at least one holiday allowance, the so-called 13th and 14th wages, be abolished, and pensions paid by supplementary funds should be cut by 35 percent" (AP)

Just 24 hours to agree to this harsh austerity or Default.

And what happens??   Talks extended into Monday...

Not sure what there really is to talk about.  The choices are really like an evil person saying "We will cut your left and right arm off as well as your right foot, or we will kill you outright"   How much deliberation does one need on a choice like that?  When does the pride instinct kick in?

We've learned and observed many lessons over the past 39 months.  Among them is that few to no world leader truly cares about its people, especially in a crisis, and when the choice is between reality and can-kicking, everyone including the common people want it kicked.  Happily so.

Also learned that few people in the US have really been affected so far by this recession.  Most of the people hurt and harmed were those in such bad shape from policies of the last 30 years that even in economic boom, they'd be going bankrupt, foreclosed upon and all that.  Very few others have.

You walk in most malls.. still see it bustling.. still see plenty of vapid, anti-social, technology addicted teenage morons with their headphone buds in ears and texting away without a care in the world.. Still see plenty of consumers consuming with credit cards swiping and registers cha-chinging all the live long day.. Still see people emotionally oblivious to everything outside their immediate family and more immediate needs.

The biggest lesson learned with few exceptions is that in this whole global economy narrative of crumbling banks, bailouts, recession and supposed "recovery", from politicians to investors to everyday people, there really is no one to cheer or root for.  And so few heroes.

Politicians are corrupt, bankers/financiers are evil, Investors are vermin and most everyday people won't fight back in any meaningful way.  Could be apathy or a fear that god-forbid, all their 'stuff' will be taken from them.  And the youth- they have the most cause to fight since every 18yr old college student without a silver spoon or teat to suckle upon, becomes a debt slave via student loans before legally allowed to take their first drink.  And that debt never, ever, Ever go away... Even in a bankruptcy.

In other parts of the world, youth fight back, or at least try to.

Angry Youths Attack House Of Greek President Papoulias; Hurl Rocks, Molotov Cocktails (AP) -- "About 30- 50 Greek youths arrived by motorbike and on foot just after 8 p.m, hurled a Molotov cocktail, rocks and paint at the house but stopped short of attacking the two guards at the President’s house"

In America, they sit outside in parks for days and weeks on end sipping coffee from thermoses while listening to their ipods and texting nothing important while mainstream America ignores them.

Either we've become That lazy and detached a nation, or those suffering the most still believe so much in the whole Left-Right political canard that no one wants to embarrass or hurt Obama's chances at re-election with a sincere dust-up.   I can't imagine such restraint if McCain/Palin were running the nation with exact same economic policies or even say a Bush third-term.

So, deadline extended in Greece one more day.  We still assume all will be worked out to the powerful banking interests' will...  or who knows, be extended another day.

Greece is the nation that invented democracy.   Would be nice if they be less like Athens and more like Sparta.

When know-it-alls know nothing

~ "I'm tellin' ya.. you gotta' be in the market!  Buy lotta stocks.. ya Gotta!"

Don't know which I hate more- the stock market, those who invest in it or those who report on it.  Tough call- all equally dreadful and in the case of investors and media, both worthy of a face scratching.  The reasons we've stated too often to take time to repeat here.  Suffice it to say, if you're not part of the 1%, you should be wanting to sharpen your claws as well...

But as much as I despise these entities, they also make me laugh at times.  I tend to find it humorous when cocky cock know-it-alls think they have all the answers and can accurately predict economic events based on assumption that all will work out when push comes to shove, then are proven wrong.

Here's a headline from this morning:


Emerging Stocks Set for Biggest Monthly Gain in Three on Greece Optimism (Bloomberg) -- "Emerging-market stocks rose, with the benchmark index set for its largest monthly gain since October, after Greek Prime Minister Lucas Papademos said major progress has been made in debt-swap talks... he’s “strongly committed” to reaching a debt-swap accord with bondholders that is crucial to lowering Greece’s debt burden and freeing up another round of aid before the country faces a 14.5 billion-euro ($19 billion) bond payment on March 20."

And the market rejoiced and figuratively held hands as they danced around in the garden of eternal optimism and never-ending profit making...  La La La...

But then later in afternoon...

Greek officials attack EU and IMF as debt talks stall (Guardian.UK) -- "Greek officials launched a vociferous behind the scenes attack on European Union and International Monetary Fund negotiators as talks in Athens over the country's mounting debts appeared to stall... a crisis meeting of party leaders would be called as early as Thursday to thrash out a response to an increasingly intransigent negotiating team sent by Brussels, which is demanding severe austerity measures before sanctioning a further €130bn (£109bn) of bailout funds...


"On the negotiations over the bailout funds, Greek MPs have objected to demands by the troika for further wage cuts and reductions in the minimum wage.  The troika (European Union, International Monetary Fund & European Commonwealth Bank) doesn't appear to be willing to accept any concessions whatsoever on reducing the minimum wage and scrapping bonuses," said the government aide. "No political party is willing to move either, saying wage cuts are a red line they are simply not going to cross. You tell me how this is going to be resolved. We have no idea and we're very worried.""

A&G does not pretend to hide the fact we want this to fail and overall, desire Greece to do what it should have done two years ago... Default.

 "Meowww... hate investors & banks sooo much.. Meeeowww!! Rrrr Rrrrr"

Investors and banks have not had to take any real financial hit or punishment since the global economic crisis began with Lehman Bros in Oct, 2008. That is now 39 months.  Its about time they did..  Its about time the ultra-wealthy around the world who do nothing but create misery in populaces then financially profit from it, hemorrhage Severe losses and feel real pain.

Unfortunately the way this game has been played for over 3 years, there's always some magic trick or scheme or compromise pulled from thin air (or someone's ass) to keep all the plates spinning so no one at the top financial echelon ever feels any economic pain.   So we're realistic to the probability that all will work itself out for the bankers and the Investors will continue to rejoice and 'dance'.

But Lord knows, we are not hoping for it.

And if Greece sells all of its soul to the banks, well there's always a ray of hope that the Portuguese wont.. or the Irish... or the Italians.. or the Spanish..