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Beware of American econ professors!
Beware of American econ professors!
How Krugman, Sachs and Stiglitz led the Greeks astray.
In countless public utterances and interviews since his resignation, former finance minister Yanis Varoufakis has spoken of how he urged the prime minister to authorize the issue of a parallel currency, to declare that Athens would default on €3.5 billion in Greek government bonds owed to the ECB on July 20 and to seize control of the Bank of Greece. Such an aggressive move would have led inevitably to the introduction of a new currency.
The idea was to use the personal data of Greek taxpayers to secretly create parallel accounts that would facilitate payments in case of a major liquidity squeeze. These accounts would be denominated in euros, but if the need presented itself, they could be turned into the new drachma “at the drop of a hat.”
Varoufakis is not the only one to have harbored revolutionary plans.
“They have served Greece’s cause very poorly indeed.”
On July 14, a few days before he was dismissed from the cabinet for voting against measures mandated by the agreement reached between Tsipras and Greece’s creditors, Panayotis Lafazanis, the head of the Left Platform, the influential far-left faction within Syriza, suggested seizing the national mint and expropriating up to €22 billion in reserves (his figure).
LEAKED (Denied then Confirmed): ECB Not Sure If Greek Banks Can Open Monday
LEAKED (Denied then Confirmed): ECB Not Sure If Greek Banks Can Open Monday
There seems to be a growing willingness in the Eurozone to get this over with, to let Greece default and go from there – with all the options that this might entail. But even if a last-minute bailout agreement materializes, one thing stands out in this sea of chaotic uncertainty: Greek banks are toast.
The top four – National Bank of Greece, Piraeus Bank, Alpha Bank, and Eurobank Ergasias – account for 91% of Greek banking assets. They’ve already been bailed out twice. Their shares are penny stocks. They have two toxic problems: liquidity and solvency. Either one can topple them.
Liquidity is a problem because the Greeks have zero trust in their banks and have been yanking their euros out with increasing desperation. They won’t ever forget what happened to depositors in Cyprus. Deposits have plunged about 20% since November, to €130 billion. According to Reuters, “banking sources” said that just during the first three days of this week, Greeks have pulled €2 billion from their accounts – about €667 million a day, compared to prior weeks when they’d withdrawn €200 to €300 million a day.
Meanwhile, funding from central banks has jumped to over €120 billion: €40 billion from the ECB directly; and €83 billion via the Emergency Liquidity Assistance (ELA) through the Bank of Greece. Thus, deposits and central-bank funding are rapidly approaching a dreadful level: parity.
“There’s a real possibility they’ll fold, not just Greece but the banks themselves,” Fitch Managing Director James Longsdon told CNBC.
And ELA, the lifeblood of Greek banks, is conditioned on two things: available collateral and solvency.
…click on the above link to read the rest of the article…
Greece: It’s Time For Your Default And Debt Restructuring
Greece: It’s Time For Your Default And Debt Restructuring
For some reason, people think a sovereign default, and a subsequent debt restructuring such as Greece’s government faces, is something that is conceivable – the proverbial asteroid hitting the earth – but which has never actually happened.
Sometimes, raw data says more than words. According to a dataset from the National Bureau of Economic Research, there have been at least 153 sovereign debt restructurings since 1980.
Ideally, Greece’s government will be able to reduce the overall debt load, now around 192%, to something manageable, perhaps around 50% of GDP. This process is rife with danger, alas, and I suggest consulting with Russia (which had a default and debt restructuring in 1998-2000 that reduced the net present value of the outstanding debt by about 50%) to avoid some of the potentially bad outcomes, such as widespread asset stripping by foreign entities (which is already going on), or the loss of domestic sovereignity and the installation of some unelected EU-controlled autocrat, as arguably happened in Italy under Mario Monti. It also happened in Greece, under unelected technocrat prime minister Lucas Papademos, who was previously the governor of the Bank of Greece, and then afterwards became the Vice President of the European Central Bank. Papademos argued against a eurozone deal to write off half of Greece’s debts. He wanted a far smaller “haircut,” because a 50% writeoff would hurt banks.
Since Papademos’ stay of execution for the bankers, there have been a long series of “bailouts” by various official entities beginning May 2010, funded by directly or indirectly by taxpayers outside of Greece, notably Germany and France. None of this has helped Greece’s situation in any way. The Greek government’s debt/GDP was 130% at the end of 2010. A 50% writeoff would have reduced this to about 65%. The eurozone’s official government debt-to-GDP ratio limit is 60%.
…click on the above link to read the rest of the article…
Is Greece About To “Lose” Its Gold Again?
Is Greece About To “Lose” Its Gold Again?
When it comes to the topic of Greece, most pundits focus on two items: i) when will Greece finally run out ofconfiscated cash, and ii) will Greece fold to the Troika (and agree to another bailout(s) with even more austerity) or to Russia (and agree to the passage of the Russian Turkish Stream pipeline, potentially exiting NATO and becoming the most important European satellite of the USSR 2.0) once that moment arrives.
And yet what everyone appears to be forgetting is a nuanced clause buried deep in the term sheet of the second Greek bailout: a bailout whose terms will be ultimately reneged upon if and when Greece defaults on its debt to the Troika (either in or out of the Eurozone). Recall that as per our report from February 2012, in addition to losing its sovereignty years ago, Greece also lost something far more important. It’s gold:
To wit:
Ms. Katseli, an economist who was labor minister in the government of George Papandreou until she left in a cabinet reshuffle last June, was also upset that Greece’s lenders will have the right to seize the gold reserves in the Bank of Greece under the terms of the new deal.
The “new deal”referred to is the Second Greek Bailout, which either will be extended and lead to a third (and fourth, and fifth bailout, each with every more draconian terms until finally Greece does default), or will collapse at which point the Troika will indeed have the right to seize the Greek gold reserves.
What makes this case particularly curious, however, is that it won’t be the first time Greece will have “lost” its gold. In The Tower of Basel, citing the BIS archive from Febriary 9, 1931, Adam LeBor writes:
…click on the above link to read the rest of the article…
