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As rumored earlier, Greek debt restructuring talks have collapsed, with private bondholders...

As rumored earlier, Greek debt restructuring talks have collapsed, with private bondholders unwilling to accept the IMF's insistence of a greater than 50% haircut. "Under the circumstances, discussions with Greece and the official sector are paused for reflection on the benefits of a voluntary approach," says the IIF chief (negotiating on behalf of the bondholders).
Comments (42)
  • Jean-Francois Morf
    , contributor
    Comments (40) | Send Message
     
    Most bondholders have bought CDS, so they want 100% (so CDS pays 0%) or 0% (so CDS pays 100%)! Any other pay back is less interesting: for example: 50% haircut means CDS pays 0%!
    Best for Greece: default, and then 2 USA big banks could loose up to $ 150 trillions, for having imprudently sold (OTC) too much CDS, even to greek multi-billionaires having no bonds! Multi-billionaires now manipulating the medias to predict (a self fulfilling prophecy) that Greece will default!
    The 1 quadrillion $ derivatives market is an american stupidity!
    13 Jan 2012, 12:18 PM Reply Like
  • keithfeather
    , contributor
    Comments (106) | Send Message
     
    Which banks sold the CDS on greek debt?
    13 Jan 2012, 12:34 PM Reply Like
  • dividend_growth
    , contributor
    Comments (2897) | Send Message
     
    Total net notional of CDS of outstanding Greek sovereign debt is $5 billion.
    13 Jan 2012, 01:24 PM Reply Like
  • alkanebenzene
    , contributor
    Comments (36) | Send Message
     
    Only problem is that the Fed will not let the big banks lose their money. They will step in, and we will have to foot the bill. If was a free market, the banks who lent them the $ would fail, and private investors would lose. Then, we would have some redistribution wealth. They made the bad investment, let them suffer. But history has shown, Fed will not let this happen.
    13 Jan 2012, 07:58 PM Reply Like
  • ExaminerB
    , contributor
    Comments (29) | Send Message
     
    Finally a comment that demonstrates an understanding of the matter. As an employee of a US financial institution regulator, I can tell you that they are busy estimating US bank CDS exposure to european debt. Here is the thing we must all fear.
    14 Jan 2012, 11:55 PM Reply Like
  • Dr. V
    , contributor
    Comments (1179) | Send Message
     
    "France’s total exposure to Greece fell by 29% to $65bn in the fourth quarter of last year compared with the previous quarter, while Germany’s fell by 43%, to $39.9bn, according to Financial News calculations, based on BIS data."
    16 Jan 2012, 02:30 AM Reply Like
  • Spencer Knight
    , contributor
    Comments (417) | Send Message
     
    Can't say that is too surprising. It seems like a game of poker. Who is going to get their bluff called first. If the bondholders don't take any deal they may lose 90% value. But at the same time accepting anything over a 50% cut is also not a good situation.
    13 Jan 2012, 12:22 PM Reply Like
  • SanDiegoNonSurfer
    , contributor
    Comments (3403) | Send Message
     
    "It seems like a game of poker."

     

    Not really. The Eurozone leaders themselves set this up to happen when they asked initially for a restructuring deal w/a 50% haircut. Since that wasn't considered a default, the banks simply sold their bonds to hedge funds rather than take the loss. The hedge funds bought CDS's. They win no matter what. It's an arbitrage opportunity for hedge funds, created by the blundering of the Eurozone leadership.
    13 Jan 2012, 07:14 PM Reply Like
  • Good Captain
    , contributor
    Comments (456) | Send Message
     
    You stole my thunder SD except I would add that secondary purchasers of Greek debt certainly never paid anything close to 100% of what the original purchasers paid for the instruments.
    14 Jan 2012, 03:19 PM Reply Like
  • SoldHigh
    , contributor
    Comments (1013) | Send Message
     
    The historical failure rate for Socialism remains at 100%, so it's odd that the US regime is mimicking the failure of the EU. I hope the good people of American figure this out and remedy the mistake of 2008. but 'hope' is an ignorant strategy (unless you're running for office).

     

    Greece in its current form is not salvageable and is already defaulting as the 50% haircut already demonstrates.
    13 Jan 2012, 12:43 PM Reply Like
  • Dr Jan
    , contributor
    Comments (103) | Send Message
     
    If you knew anything about economics, you would know that Greece has a 100% capitalist economy. There is no "Socialism" in Greece.

     

    I understand that when an American uses a word like "socialism" he is simply swearing--in effect, he is saying "goo-goo, I hate you, duh." Similarly with the word "fascist"; I don't think there are more than 100 guys in the USA that know what the word means. Similarly with the word "racist." As most Americans use it, it again simply is a swear word that means "I hate you.".

     

    Even though I know that you do not care that the words you say and write have no meaning, still I think it is useful from time to time to remind you of that fact.

     

    The point is this: Given that Greece has a 100% capitalist system, actions A, B, and C are needed to solve its problems. If Greece in fact had a socialist system, a different set of actions would be needed; call them D, E, and F. Since you don't know what the problem is, you will never come up with a solution.

     

    Hence, it would be better if you want to swear at the Greeks, simply to use the old fashioned curse words that often have 4 letters. That way you would at least be honest by acknowledging that you know nothing about the Greek situation.
    21 Jan 2012, 05:02 PM Reply Like
  • blueline
    , contributor
    Comments (1546) | Send Message
     
    "100% capitalist economy" ha ha ha ha ha ha ha ha ha ha ha ha!
    22 Jan 2012, 06:43 AM Reply Like
  • youngman442002
    , contributor
    Comments (5131) | Send Message
     
    Yes the banks and hedge funds have turned our markets into casinos....and you ask who has sold the CDS....no one knows as that is off balance sheet...remember AIG..that name will come up alot as a comparisiion to the 20 or so new AIGS that have sold CDS but can´t pay when they lose the bet.....oh well..we just print another 200 trillion to cover the bad bets....
    13 Jan 2012, 12:48 PM Reply Like
  • dividend_growth
    , contributor
    Comments (2897) | Send Message
     
    Greek default is a prerequisite to a healthier Euro zone.
    13 Jan 2012, 01:25 PM Reply Like
  • Mike Ondrovich
    , contributor
    Comments (123) | Send Message
     
    I'm not excited about having another currency emerge back into the market place though...

     

    I think that would be Mutually Assured distruction.
    13 Jan 2012, 05:46 PM Reply Like
  • Econdoc
    , contributor
    Comments (2944) | Send Message
     
    Let them sell some islands - they have plenty. That's all they have to offer. So be it. I am so sick of these whining Porsche driving latter day Leonidas' - without the gumption. Let them eat Feta - I say. Enough.

     

    E
    13 Jan 2012, 02:33 PM Reply Like
  • talan123
    , contributor
    Comments (11) | Send Message
     
    From what I understand is that these Hedge Funds are betting that Germany will have sympathy for the Greeks and come to the rescue.

     

    Has betting on German Sympathy ever worked?
    14 Jan 2012, 03:59 AM Reply Like
  • Michael Parmar
    , contributor
    Comments (236) | Send Message
     
    if greece defaults and all cds falls due then cds pays out 0, many insurers.banks collapse and EU goes under meaning biggest economic bloc in the world goes under, etc, etc....

     

    this is a bargaining game, the cooperative outcome is to deal, anyone holding CDS with a less than 100% probability of payout in the event of default has an incentive to explore a deal.

     

    in such a game, the cooperative solution is typically 50/50 split (both parties outside options are of equal value or worthless) which is where we were headed with the IIF/Greece.

     

    However, Hedgefund holders have a different valuation and the Greece/EU has to factor in the impact of the downgrade to its bailout requirements and EFSF role in the sustainability of the bailout plan (likely EFSF rating and funding changes), which means a reset to the talks
    14 Jan 2012, 08:02 AM Reply Like
  • marketman54
    , contributor
    Comments (823) | Send Message
     
    Greece has done the minimum to keep in the game. They have done nothing since the last big Euro meeting telling them to slash their budgets and clean house.

     

    They are not willing and WILL NOT change a thing! They hold all the cards, they are the debtor. If they don't pay, they will get kicked out of the Euro union and print all the money they want. Game over.

     

    But then you have Italy, Spain, Portugal, France, Ireland, England, Belgium, Hungary and who knows how many more that will collapse as will their banking system.

     

    Ahhhh, kick the can works so well when you add a game of Texas Hold em' !! Hey, isn't this the same game the U.S. is playing with foreclosures, national debt, government spending, making any type of change that would benefit our country.

     

    Jump on a life boat folks, your standing on the deck of the TITANIC!
    14 Jan 2012, 10:58 AM Reply Like
  • SanDiegoNonSurfer
    , contributor
    Comments (3403) | Send Message
     
    The U.S. is not like Greece. We have control over our own currency and have our own central bank. We also have natural resources and a thriving tech industry.

     

    Greece's debt is certainly a problem. But the real problem for Greece is that it has none of the things that could conceivably make it a sustainable economy -- no control over its currency, an obsolete economic basis (shipping), and few natural resources. If its debt were reset to zero today, Greece would still be in deep trouble.
    14 Jan 2012, 12:17 PM Reply Like
  • blueline
    , contributor
    Comments (1546) | Send Message
     
    "If its debt were reset to zero today, Greece would still be in deep trouble." True very true!

     

    Greece is the classic example for the saying; Socialism is a wonderful thing until you run out of other peoples money to spend.
    14 Jan 2012, 01:49 PM Reply Like
  • marketman54
    , contributor
    Comments (823) | Send Message
     
    Just one thing blueline, they won't run out until March 12th and they may still get some more Eurola's!!
    14 Jan 2012, 05:57 PM Reply Like
  • SanDiegoNonSurfer
    , contributor
    Comments (3403) | Send Message
     
    Greece's problems have nothing to do with socialism. Even the worst blame one can (factually) attribute to the Greeks -- living beyond one's means -- is a behavior more common among capitalists than socialists.

     

    Greece's decision to join the Eurozone is probably the biggest single cause of its current (and intractable) problem. Greece was devastated during WWII and the citizens worked very hard to re-establish their economy. I happen to have visited there in the 80's. One of the things I recall from that visit is the women who spent nearly every waking hour at a loom, weaving rugs to sell to tourists. It was a meager living, barely enough to feed a family. There was less work for men. Some went to Germany seeking higher wages but many never returned, so the women worked themselves into an early grave and paid the bills as best they could.

     

    Greece, quite simply, lacks the basis for a modern economy. In the past, Greece's strategic location brought some income to the country from foreign nations interested in having a presence there. But that's gone now. More recently, shipping, Greece's traditional industry, has also been decimated as China put forth a national effort to dominate the world's shipping industry, driving rates down below profitability levels. The Chinese government will finance that initiative for as long as it takes to destroy its competitors. Greece is not in a position to fight back.

     

    About all that's left is tourism and that's not enough to fund a modern economy. The real problem is that there's no way out. The entry into the Eurozone was a one-way ticket. Greece simply has no mechanism for self sufficiency at the level of a modern society without external help. And since it doesn't control its own currency, it cannot simply weaken its currency so as to put itself into a more competitive position with respect to the rest of the world.
    14 Jan 2012, 10:12 PM Reply Like
  • blueline
    , contributor
    Comments (1546) | Send Message
     
    SanDiego, I agree with you that a major cause of it's current problems was it's decision to join the EZ. It denied them a sovereign currency and the ability to devalue it. That would have forced an end to the governments deficit spending.

     

    I don't agree with your assumption that" living beyond ones means" is more common among capitalists. A capitalist society has to make a profit and if it doesn't it goes bankrupt. Which is what should have happened to Greece years ago but the government couldn't admit to the people that their utopian dream was a lie.

     

    The people of Greece, while publicly supporting a socialist government, have known for years that it was not sustainable. The underground economy, the refusal to pay the repressive taxes, and the flight of money out of the country are clear examples of the Greeks preparing for the inevitable collapse.
    15 Jan 2012, 09:16 AM Reply Like
  • SanDiegoNonSurfer
    , contributor
    Comments (3403) | Send Message
     
    blueline, thanks for the civil reply. I don't get many of those from people who disagree on points like this one :-)

     

    It's a rather soft construct so it may be hard to prove something like this either way but I think the evidence points to the conclusion that living beyond one's means via debt is a characteristic of capitalist culture. It's the reason so many Wall Street types go broke when there's a financial meltdown -- they have no savings, they've spent and borrowed to live the good life rather than saving. Flipping houses was a purely capitalist speculation and one becomes more and more leveraged with each sale, so again debt became a problem when things changed. In contrast China, a socialist nation (actually a hybrid of socialist and capitalist institutions), we see a much greater savings rate and people generally living w/in their means.

     

    In a socialist society, the state owns the means of production. That isn't how Greece.is structured. Greece is primarily made up of small merchants -- la petite bourgeoisie. There's also some industry -- again privately owned. Anyone in Greece can start a private business and own their own means of production. So whatever one concludes about the correlation of debt and social organization, it literally cannot be the case that Greece is in trouble because it's a socialist economy -- for the simple reason that it's not a socialist economy.

     

    The situation in Greece is idiosyncratic and defies easy labeling. It's not a failing of capitalism or of socialism. Government corruption appears to have played a large role. It turns out the Greek government had been misreporting the nation's public debt to the EU and to their creditors for years. Cooking the books in other words. This only got revealed after the financial crisis and by then it was a catastrophe. Lying and covering up isn't limited to socialists or to capitalists. It's a human failing.

     

    I've been told, but don't know if it's true or not, that a big part of the problem is that the Greek government lets people get away with not paying their income tax -- that there's a lot of fraud and cheating in that regard while the government's tax collectors look the other way. Having spent some time in the Mediterranean, I can easily believe this may the case but of course I don't know for sure. In a purely socialist society tax evasion presumably wouldn't even be possible since there would be no such thing as private wages.

     

    There may well be things about the situation that support whatever point it is you wish to make. You'd make that point more effectively by addressing those things directly rather than trying to contort the word "socialist" around Greece or Greece's debt crisis. There may even be things we agree on. In fact I think it's likely. Why not give it a go?
    15 Jan 2012, 11:21 AM Reply Like
  • VictorHAustin
    , contributor
    Comments (827) | Send Message
     
    It seems like overspending and failure to live within one's means and save have all declined in the U.S. over the generations just as enterprise has declined in the face of increasingly socialist approaches to more and more of our common life.

     

    I say enterprise because I think the key lies more in the freedom than the capitalism. Socialist nations substitute state capitalism; everything needs capital. It's just that they do it with centralized, totalitarian control instead of liberty. IMHO we're having the wrong argument when we use the words capitalism and socialism.

     

    Bail outs are viciously anti-liberty. They are takings and oppression at it's strongest.
    15 Jan 2012, 12:17 PM Reply Like
  • SanDiegoNonSurfer
    , contributor
    Comments (3403) | Send Message
     
    Victor, low interest rates tend to encourage spending and discourage savings. We've had low interest rates for the past 11 years. The unusually high interest rates during the 80's encouraged savings and Volcker was able to force a recession by raising federal funds rates even higher.

     

    Clearly low interest rates are not a multi-generational trend. Nor is savings rate a uniform trend. It seems to be cyclical. The boom and bust cycles in the early part of the 20th century would have been well cushioned (and therefore not possible) if everyone had had substantial savings. Also, one characteristic of a recession is an increase in the rate of household savings. It happened in the Volcker recession and it happened again after the recent financial meltdown.

     

    I think we had some very bad monetary and budget policy during the years leading up to the recent crisis. Interest rates should have been allowed to go up as we came out of the dot-com crash. If they had, we'd likely have seen more savings and housing speculation would have been dampened considerably.

     

    However, we seem to be wandering far afield from the topic of Greek debt!
    15 Jan 2012, 01:25 PM Reply Like
  • Dr Jan
    , contributor
    Comments (103) | Send Message
     
    It's amazing to me how Americans believe "I have a right to express my opinion"--even when they know far less than nothing about the subject under discussion.

     

    It would take pages and pages just to list all the crazy mistakes in the comments..

     

    Just one should do. Greece is NOT a socialist country. The Greek economy is based on and embodies "free market capitalism."

     

    (Which, as in the US, is the same as crony capitalism, which means, as in the US, the 1% screw the 99%. No Greek millionaires and billionares are being hurt; they sent their money overseas mjany months or years ago. Only the hard-working and thrift are being hurt.)

     

    The definition of "socialism" is, and has been since the century before the century before this century, is a country where all major industries are owned by the government.

     

    In extreme situations, as in Cuba until recently, the government owned everything. Even one-man candy stores.
    That is not needed to define a country as socialist. However, the government does have to own all the "commanding heights of the economy," as Sidney and Beatrice Webb put it. A country, such as Greece, in which manufacturing, retail, banking, and utilities, etc. are owned by private companies is NOT a socialist country.

     

    I mean words ought to have meaning. If Greece is a socialist country, then every country in the world is a socialist country. Since the economy of Greece is run on the same lines as that in the USA, Japan, France, Germany, Switzerland, Sweden, Taiwan, Singapore, etc.etc.etc. But if every country in the world is a socialist country, then the word socialism has no meaning.

     

    15 Jan 2012, 12:21 AM Reply Like
  • blueline
    , contributor
    Comments (1546) | Send Message
     
    Dr Jan, You quote a couple of socialist/communists who have been dead for 60 years as proof that Greece is not a socialist country. LOL

     

    Papandreu who was just thrown out of office was the president of the Panhellenci Socialist Movement (PASOK) which is the dominate party. PASOK the Communist Party of Greece (KKE), and the Coalition of the Radical Left (SYRIZA) make up the ruling electorate.

     

    You have confused communism with socialism. Your reference to Cuba which is a communist country not a socialist country is an example of your lack of understanding.

     

    Socialism is a defined as a large centralized government that regulates and controls the majority of the economy. Greece does have a substantial free enterprise capitalist underground economy but the official government socialist policies (unsustainable entitlements) are the direct cause of their collapse.

     

    Yes, Americans do have the right to express their opinions. It's called the FIRST AMENDMENT!!!
    15 Jan 2012, 08:48 AM Reply Like
  • American in Paris
    , contributor
    Comments (5504) | Send Message
     
    Blueline,

     

    Most European countries are social democracies, including Mighty Germany.

     

    It is an exaggeration to claim that unsustainable entitlements is the direct cause of Greek economic problems. First of all, there is massive tax evasion. At least 30% of the Greek economy is black. Second of all, there are too many impediments to competition such as closed professions and state owned companies.

     

    Greece also has a remarkably bad bureaucracy in contrast to many generous social democracies such as Sweden.
    15 Jan 2012, 12:22 PM Reply Like
  • blueline
    , contributor
    Comments (1546) | Send Message
     
    AP, I agree that most European countries are social democracies, the key word is "social".

     

    Yes, the people of Greece are evading their taxes because the amount of taxes necessary to sustain their entitlements is repressive. People throughout the world are doing the same thing because it is the most effective way of taking back control of their freedom. The USA included.

     

    Yes there are to many impediments to competition and state owned companies which is the result of to large of a centralized government.

     

    In order for a socialist society to survive and be able to sustain itself, all of the people must, or at least an overwhelming majority, support socialism politically and financially. Greece supports socialism politically but not financially. Sweden supports socialism both politically and financially, at least for the moment. Given their birth rate and immigration policy their future is a little cloudy.

     

    I see Greece as the test tube example of where America is heading in 5-7 years. We also have a huge expanding underground economy with taxes being avoided. The majority of Americans also support the entitlements here politically but the majority also refuse to support the entitlements financially.
    15 Jan 2012, 02:55 PM Reply Like
  • SanDiegoNonSurfer
    , contributor
    Comments (3403) | Send Message
     
    blueline, A social democracy, in the sense that AinP used the phrase, is not at all the same thing as socialism. You're confusing two different terms that mean completely different things.
    16 Jan 2012, 10:29 AM Reply Like
  • The Mighty Wart
    , contributor
    Comments (119) | Send Message
     
    A lot of Americans believe wrongly that every country with a free education system and free health care is a socialist country so no point to keep discussing it. Let them keep calling Obama a communist lol.
    17 Jan 2012, 10:33 AM Reply Like
  • marketman54
    , contributor
    Comments (823) | Send Message
     
    Call him whatever you want!! He is still trying to give people to give everyone some kind of cradle to grave handout - middle class pays no taxes, pays for nothing and yet he wants to keep on giving!!

     

    Communist not, probably socialist is a better term.

     

    Either way, the laugh is on us for raising the debt ceiling to $20 trillion
    17 Jan 2012, 04:01 PM Reply Like
  • Min Ren
    , contributor
    Comments (34) | Send Message
     
    @ Dr Jan

     

    If Greece has a free market, competitive environment, it won't be in this situation today.

     

    Lack of natural resource doesn't serve as an excuse SanDiego, just look at Singapore. Greece people, whether government or citizen, just lack of the sense of survival.

     

    It's simple to find out whether Greece is Socialism or not. Socialism encourage laziness. Capitalism force people to fight for their own survival.

     

    So now, is the Greece people hardworking?
    18 Jan 2012, 12:15 AM Reply Like
  • blueline
    , contributor
    Comments (1546) | Send Message
     
    Wart, You can play the name game all you want, why do you think the socialists started calling themselves Progressives. It was just a public relations gimmick.

     

    A government that provides free education, free health care, free transportation, free food, pay for no work, and repressively regulates every major business is a socialist country.

     

    I'm not sure if Obama is a communist or just a socialist but he sure has a lot of communist friends, and has had his entire life.
    18 Jan 2012, 12:08 PM Reply Like
  • The Mighty Wart
    , contributor
    Comments (119) | Send Message
     
    One other thing I forgot: Americans tend to equal socialism with plain incompetence.

     

    Just to be clear, I only mentioned free education system and free health care so putting free transportation, free food, pay for no work, etc in my mouth is ridiculous.

     

    Greece has a free market economy and many private companies, this is a fact. Whether they work or not is due to competence and efficiency no progressivism/socialis... or capitalism. Saying that they don’t work because of socialism doesn’t make sense: they wouldn’t exist in the first place. The fact that they don’t work could be due to a myriad of reasons. There are structural facts why this could happen, to name a few: Greece has no major natural resources and they don’t have their own currency any more. On top, their elites are very corrupted. These things are impossible to change or extremely difficult to turn them around.

     

    That Greece civil servants only pick their noses is plain incompetence. In fact, I could easily believe this is true but that won’t change me thinking that Greece is a “socialist” country.
    19 Jan 2012, 08:47 AM Reply Like
  • blueline
    , contributor
    Comments (1546) | Send Message
     
    Papandreu who was just thrown out of office was the president of the Panhellenci Socialist Movement (PASOK) which is the dominate party. PASOK the Communist Party of Greece (KKE), and the Coalition of the Radical Left (SYRIZA) make up the ruling electorate.

     

    Call it what ever you want!!
    20 Jan 2012, 09:27 AM Reply Like
  • The Mighty Wart
    , contributor
    Comments (119) | Send Message
     
    So?? China is ruled by a communist party. So China is a socialist economy, right?

     

    Having the wrong assumptions will lead you to the wrong answers/solutions.
    22 Jan 2012, 09:23 AM Reply Like
  • blueline
    , contributor
    Comments (1546) | Send Message
     
    Wart, China has 1.3 billion people with the majority still living in a communist economy. The China that is talked about in the west has state capitalism for about 300 million of their citizens. State capitalism is really a form of crony capitalism where the government controls commerce and business with a profit motive thrown in.

     

    No one starts any business in China without the approval of the central planning committee.

     

    Having the wrong answers/solutions will lead you to the wrong assumptions.
    22 Jan 2012, 03:38 PM Reply Like
  • wickmanb
    , contributor
    Comment (1) | Send Message
     
    A Greek friend of ours said it best about 25 years ago, "Bill, this will never work! We're fifty years behind the Germans and working half days to catch up." Very funny, at the time, and sadly true today.
    15 Jan 2012, 04:24 AM Reply Like
  • Mike Ondrovich
    , contributor
    Comments (123) | Send Message
     
    Are we concerned with 3/20 or 6 weeks prior when the paperwork needs to be filed?
    18 Jan 2012, 01:43 PM Reply Like
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