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February 16, 2010


Jack is Back!

The Algea led by Oizys and Penthos are now in charge of the Greek destiny.

Hedon and Kharites are both in Vancouver enjoying the Olympics.


--Meanwhile, aid talk tied to budget cuts and tax hikes continue.--

This IMF formula for wrecking an already messed up country has never failed before; why stop now?

Rick Ballard

Matt has a good piece up with a link to Mauldin's take. Mauldin puts the necessary cuts in the Greek budget at the level equivalent to a $560 billion cut in the US budget. Given that the Greek government is even more socialist than the Obama Administration, I doubt the possibility of that happening.

You can't even see light through the gap between the rock and the hard place on this one.

Rob Crawford

This IMF formula for wrecking an already messed up country has never failed before; why stop now?

What if they tried budget cuts and tax cuts? Cut enough from the budget and they'll stop bleeding; if the taxes are cut enough to spur growth, then they'll eventually pay off the debt.

Of course, that would require them to work, so the odds are pretty slim it wouldn't end in a massive riot/tantrum that installs an out-and-out (national?) socialist government...


Wouldn't a good start be actually collecting the taxes they are supposed to collect now?

I'm doubtful the euro would survive a Greece collapse because there is little support for a deeper integration of Europe in France or Germany, which would be required to bring budget discipline to Greece (and it would be a howler to see the Germans and French pencilwhipping the Italians, Spainiards, and Irish in budget negotiations. I'm sure the Italians and Spanish would blast France over ag subsidies and the CAP). Also, doesn't the Swedish banking crisis of the late 90's and the Iceland banking crisis of '08 militate against either further integration or continued use of the euro. Iceland and Sweden were able to use the tools of a sovereign government to recapitalize their financial sector, an avenue that is closed to Greece.


--What if they tried budget cuts and tax cuts?--

What if the leopard changed its spots?

Old Lurker

We are about to see if the Euro guy has any clothes on or not.

Capital is waking up from its slumber and is discovering lots of little tin pots are without clothing. GS cover notwithstanding.


Thanks for the shout out, Rick. The reality is that Greece is one of the unruliest countries in Europe. There is no political will to fix the problem and they are a surly lot with a strong streak of paranoia. The commies might just decide to repudiate their debt if the current government falls.

With Spain, Ireland, Portugal, Belgium, Italy and the UK lurking out there and other economic IED's such as Dubai, commercial RE etc, all the available credit in the world right now isn't going to be enough.

We're going to see deflation hit huge, while currencies lose their value. The dollar is a paper tiger at present, but is the best of a bad lot. No one trusts the RMB.

If the European economy drops, it will suck China down and perhaps our own recovery. China's overcapacity is a huge issue and it seems to be like an old melodrama, always teetering on edge. This may be what sends it over.

A lovely frickin world....

Old Lurker

Well said, Matt, both above and on your blog.

You forgot the deflation occuring in Japan and all the demographic problems in that leg of the stool.


What a beautiful entanglement!

Oh, if only the Greeks could be the Alpha of the Omega of the EU.

I want each nation's freedom, rich cultures, currencies and traditions back.


gee thanks, OL.....it's like juggling hand grenades right now.

my only hope is that the wad of DM's I found at the bottom of a desk drawer may someday be worth something again....



In addition to the debt contagion spreading in Europe, I'd think that this crisis will have a consumer spending and business spending contagion, which will put further pressure on EU member states (and possibly set off the next leg of the recession). Also, per the Mauldin article, if the Greeks are exporting capital and fleeing Greek banks, isn't it already too late?

E. Nigma

If you read "Zero Hedge", there is a good article about this (too difficult for simple me to quite understand or summarize), but the gist of the comments following seem to blame Goldman Sachs, as the devil incarnate, and GS must die!

Surely, they (GS) were enablers, but I doubt they could twist the collective arms of the Greek government to make them do this stupid thing they did.

These people (this time the Greeks, and soon, many other "socially responsible" Europeans; the PIIGS) are basically cannibals, ready to devour anything to prolong their ride at the top, and prevent the day of judgement just a little longer.

Old Lurker

"if the Greeks are exporting capital and fleeing Greek banks"

But Rich, the Greek government asked them yesterday to please bring it back.


This doesn’t quite fall into the weather as climate …

Following a cold snap in the Northeast, Lake Erie’s surface is virtually frozen over for the first time in about 14 years.
The ice ranges in thickness between paper thin along the northern shore and several inches along the southern shore, where many people are ice skating.

GoErie.com reports that the lake hasn’t completely frozen since the winter of 1995-1996.
Although the ice cover is considered complete, prevailing winds have created some cracks in the ice.
There are also reportedly ice chunks floating off the coast of Dunkirk, N.Y., which is one of the deepest parts of the lake and would naturally be one of the last places to freeze.



I'm sure they'll bring it back. The wages of the post-nation state...

Old Lurker

They also asked that all future financial transactions please be completed with tracable bank activities like debit/credit cards, or checks, and for all Greeks to please refrain for using non tracable cash in the future. As I am sure there is no underground economic activity in that part of the world, I assume this request will not impact many people.



That brings to mind Argentina. I'm sure the Greeks are busy building an ornate wooden horse for the Germans as we speak type. And not to pry, but what part of West Virgina are you from...

And getting back to Greece, breaking, a bomb went off at a JP Morgan building... The way these thing usually play out is financial crisis -> political crisis -> national security crisis. They seem to be pretty far down the road of financial crisis and national stikes have a tendency to spread and to turn violent in Greece's political history. So, does the Cyprus situation take care of itself too and do the Greeks have other enemies besides the Turks...

Old Lurker

Rich, Charleston and Nitro


My dad is from Clarksburg and a WVU alum.

Old Lurker

Poor guy.


Danube of Thought

OT from CNN:

Washington (CNN) – Only a third of U.S. voters think that most members of Congress deserve to be re-elected this year, according to a new national poll. That's the lowest number ever recorded for that question in a CNN survey.

The CNN/Opinion Research Corp. poll, released Tuesday, indicates that only 34 percent feel that current federal lawmakers deserve re-election, with 63 percent saying no.

According to the survey, 51 percent feel their member of Congress should be re-elected - also an all-time low in CNN polling - while 44 percent say their representative doesn't deserve to be returned to office in November.

The numbers on both questions are even lower than in 1994, when an anti-incumbent fever helped Republicans win back control of both the House and the Senate from Democrats. The trend line on those questions goes back to 1991, when they were first asked.


--I'm sure the Greeks are busy building an ornate wooden horse for the Germans as we speak type.--

Beware of Greeks bearing a stinking
s#&* pile of bad debt?

You'd think an aphorism like that would be unnecessary.


You'd think. But we live in a world where the economic problems brought on by government interference in capital markets have spurred "news" articles like this: Economy prompts fresh look at ND's socialist bank.

Old Lurker

FTA "We think of ourselves as kind of a little mini-Federal Reserve,"

God help us all, bgates.

California’s coastal fog has decreased significantly over the past 100 years, potentially endangering coast redwood trees dependent on cool, humid summers, according to a new study by University of California, Berkeley, scientists.
Obviously, to save the redwoods, all of California will have to be evacuated. Most especially, the SMUG environ-types and their Piruses.
Alarmist science has outspent skeptical science by a ratio of 4,000 to 1.

Advocacy science, bah. Look who funds the study. This is taken apart at Watts Up.

Rick Ballard

E. Nigma,

I'm adding a small salt mine when reading Zero Hedge. Too many of their pieces do not provide alternative rationales to the conspiratorial theories which they present. I fell for the "Direct Sales increase are a sign of hidden Fed intervention" bit until I ran across data showing a lot of private money flowing (more than enough) into bond mutuals. Likewise, their headline today Beijing Sells Whopping $34.2 Billion Treasuries In December As Japan Becomes Largest Official Holder Of US Debt improperly uses "Sells" when "does not roll over" is probably much more accurate. A more interesting take (to me) is that China may not be generating enough cash flow to allow it to continue to purchase US debt at historic rates.

I tend to believe that their pieces on the GS/JPM prop desk market manipulation have validity but that is because of the futures games which are being played - and the low volume coupled with poor fundamentals regarding appropriate PE ratios.

remember that time I said "I Won"? That was awesome.

For the benefit of those who did not have the opportunity as I did to literally work behind enemy lines on Wall Street, let me point out that "PE ratio" stands for "profit to energy ration". In other words, it's a measure of how much profit and other forms of waste are generated per unit of energy that is rationed to a company by the central committee. For instance, a company which confiscates $10M of labor value while consuming 6M BTUs would have a PE ration of four.


--I'm adding a small salt mine when reading Zero Hedge.--

I've been of that persuasion for a time myself Rick.

JM Hanes

"PE ratio" stands for "profit to energy ration"



Perhaps someone far clever than I could dream up a way to keep Greece afloat without wrecking the Euro, but I can't. I feel the bullet has to be bitten and Greece expelled for failing to comply with reasonable means to get their mountain of debt (re loans obtained on fraud) under control.
The place is anarchy and selfishness to the 100th power and will not change.
C/mon, Angela..encourage the others!


And Rick, remember, the Chinese government has provided many billions in liquidity to a heavily overextended banking system which runs on Nobel prize winning economist Wang Chung's "Chinese Lottery" principle. Derived fromo the Irish Dead Horse raffle theory of Paddy O'Furniture, one of the key features is regular offshore transactions involving the Macau casino syndicate, which is secretly a subsidiary of Goldman Sachs, of course.

This is where an awful lot of the dollars they have accumulated will disappear down the rathole eventually. It is amazing to watch as a significant percentage of the world's total wealth goes "poof!". At least the robber barons built railroads and steel mills.


EU isn't buying Greece's austerity plan:LUN


EU isn't buying Greece's austerity plan:LUN


Here's the LUN

Kev T

Clarice -
I like the pic in the link to the Greece/EU article. That graph above the woman's head could be good or bad depending on which direction you are walking. I'm guessing the photog figured that out as well.

Rob Crawford

Greece loses EU voting power in blow to sovereignty

How is that a "blow" to their sovereignty? Wouldn't expelling them completely from the EU restore it completely? So is partial expulsion not a partial restoration?

Old Lurker

Maybe if the Greek government just asks nicely it will all work out.

LUN is a good one from Bloomberg.

Old Lurker

Clarice, more than your LUN itself, the reader comments beneath it are a wonderful peek into the UK realization what union with the others really means.

Kevin B

Where Norman Tebbit sees the Greek crisis taking Europe.

Melinda Romanoff


The "Treaty" of Lisbon exposes the EU as nothing more than the old Kremlin, just moved east.


From the Bloomberg article:
“If you don’t attack tax evasion you don’t have the moral authority to cut spending.”

Between this and Cindy Sheehan (remember her?) I don't think I understand moral authority at all.

Old Lurker

Boy are you right about that, Mel.

One of the commenters on one of those UK papers the other day called it the Fourth Reich, but you are closer to the truth.

Rob, I know the point you were making the voting power, but I also know you appreciate that accepting those external "treaty" hooks in return for swapping currencies leaves them now with the hooks an no vote. So they do have a point.

How does the Euro survive now that the scales drop from eyes? What do the Brits think about the arm twisting to get them to ratify the constitution last year?

Old Lurker

Thank you bgates.

That buried remark in that Bloomberg story struck me the same way. I tried to diagram the sentence to see if it made sense, tried looking at it upside in the mirror and still don't get it...

Melinda Romanoff


"Moral Authority" is easy, using the new math. Let me help.

"It's MY ruler to measure you with and I can mean what I want."

See? Easy as pie.

Most haven't the slightest.

Heh, they got nuthin' except presumed and mistaken moral authority. Every last progressive is a totalitarian, whether they realize it or not.

Rick Ballard


Perhaps this the Year of the Dead Chinese Tiger? Port of LA TEU stats show inbound January running -6.7% behind '09. Total '09 was -21% below the '07 cycle high. Those TEU stats are supported by outbound Port of Shanghai data for '09 as well. That works out to a -6% impact on the Chinese economy (cash - not 6 chickens for 1 pig PPP). The Chicoms claim standard +9% GDP growth for '09. Musta been a hella year on the chicken/pig exchange.

Old Lurker

Rick has been calling "show me" on the Chinese tiger for two years now and the truth is now becoming obvious to all. Matt's math on the flows into/out of US bonds is as Rick predicted.

What a world. Boy is that matress lumpy.


Don't believe in having eggs in one basket and sure like lumpy mattresses but muni's have me very concerned right now......

Rick Ballard


This ain't gonna cheer you up much. I was reading the Kraft earnings transcript today (why are you all looking at me like that?) and noted that North American sales were off 2.7% - due to consumers going for lower priced generics. Mac 'n cheese is too expensive? (Earnings were OK - no knock on Kraft.)

That consumer confidence survey is a real humdinger. I found this tidbit

The Republican-Democratic gap, which has been narrower than usual this year, is wider this week, with Republicans at -39 vs. -54 for Democrats and -52 for independents. The 15-point gap this week compares with a 5-point gap this year, 18 points last year, 41 points in 2008 and 32
points long-term.
particularly interesting. It fits in right alongside the swing in the Congressional generic and is worth watching as the 'The Great Tsunami of 2010' rolls toward shore.


Did you see the pic of Evan and his wife when he made his announcement? I think there's something else behind his hasty decision. I can't put my finger on it but I think he was afraid in a hot contest something was going to come out that he didn't want public.



I had heard that report was out and counter balanced with consumer purchasing was up--a little.

But seeing it in print nails the points down doesn't it.....

Why does my head hurt all of a sudden.

Rick Ballard

Calamari Anyone?

Cooked in the Greek style, of course. I do believe that GS may be headed for persona non grata status in the eurozone. I'm not positive they deserve it (the EU finance people knew the Greeks were juggling the books) but it's just not particularly ethical to run that type of swap and then peddle bonds without disclosure.

Watch the EU make a run at financing the Greek bailout using a GS fine for fraud.


Nah, Rick..In Brussels there surely is a coterie of sharpies who are bored with dictating the composition of weisswurst and determining the metes and bounds of the pastures and cheeseries where you can call your product cheddar and are seeing a new sphere of unchecked power on the horizon.

E. Nigma

I'm not that knowledgeable regarding finance, and "Zero Hedge" is one of those blogs that can be informative and mis-informative.
But the GS influence on structuring the debt swap and the linkage to Moody's ratings are a matter of public record.
Agreed that the EU is going to come down hard on GS for all the wrong reasons, and that will generate negative waves for other reasons.
More than high finance, it looks like a casino where everyone (China, Japan, US, Europe) are rolling craps. Is there a winner in the house??

Melinda Romanoff

E., and Rick-

The EU is going to come down on GS before the populace comes down on EU for being "cute" with the finances. Greece is not the only sovreign entity with SPVs. They just happen to be the ones with the spotlight on them right now.

They ALL have them, in some form, and this is what's making them fill their respective pants. I think Australia, India, Japan, and Singapore, are probably the only nations with economic heft without them. I include Japan, only because their whole banking system is an SPV, deflationary style. They can't do anything else.

I'm still trying to get my head around Chinese capital flows. It's more complicated than first glance, and I can't escape the sense that I'm seeing them raising cash to "feed the blue monster".

No proof, just smells like it.



No pearls, no smile, two sons, hmmmmmmmmm:


Rick Ballard


Toss this in the blender and consider the probability that the "princelings" mentioned actually raided the Chinese treasury with their stimulus package in order to get out before the storm.

Raking off a 10% kickback on that cargo cult commodities splurge would sure set up a lot of Chicom slavers for a very nice life abroad.

JM Hanes


"I can't put my finger on it but I think he was afraid in a hot contest something was going to come out that he didn't want public."

I think so too. I can't remember where I saw it, but just the other day, someone compared a picture of Bayh's putative Indiana "residence" in a little row of condos to a photo of his huge formal house in DC, where his kids go to school, etc. etc. I wondered if that might be the tip of an ugly iceberg to come. Even if he timed his actual announcement to the primary deadline, which I don't doubt, it still seemed way too sudden.

Ralph L

We're going to see deflation hit huge, while currencies lose their value.

Isn't this a contradiction? Currencies lose their value during inflation.


“We're going to see deflation hit huge, while currencies lose their value.”

What are you smoking, Dude?

But seriously, situation is unique. From the time immemorial when paper currency (and copper coins) began to substitute for gold and silver, it would be the first occasion when government goes belly-up, but does not sink national currency. All government sector, all government payroll and government pensions will be in shambles, while private sector of the economy will continue to work properly. That is before draconian taxes will hit in.


Thanks, Ann and JMH, for confirming that my suspicions aren't without foundation. JMH, I saw that article , too. Someone has been watching Evan very carefully and collecting dirt on him.


Clarice maybe he resigned because of this. :)

SCANDAL: Evan Bayh Admits All-Consuming Farmville Addiction


Or the problem could be his wife

Senator Evan Bayh (D-IN) Should Start Speaking to His Wife: The $796,000 Payday for One Stock Trade by Gregory Hilton

Say when.

Second link doesn't work for me, Fritz, but maybe I'm just spastic still from the first one.

It's gravy.

I've suspected the wife. Take a look at her. There's a woman as tough as Ms. Edwards. I'd cherchez la femme but I think elle y reste.


Fritz, thanks very much for that link--totally fascinating after I tracked it down. Here's the correct link: Evan Bayh Should Start Speaking to His Wife: The $796,000 Payday for One Stock Trade.


And here are two good articles connecting the Greek situation to the US:

The Demise of the European Welfare Nation


The Future Is Greek: Take a good look at the Greek financial crisis. America could soon face something very similar

I've still got a beef with Hillary's Hundred Grand.

My, my. Yes, Gregory Hilton explicates the scam.


oops, sorry I had to post and run - thanx anduril for finding the link.

Melinda Romanoff


You wanted some clarification on this comment: "The Non-competitive bid is from the TreasuryDirect Program that Rick so kindly pointed out earlier. It, by definition, is those participants who wish to participate in the auction, but are not allowed to bid. They RECEIVE the resulting yield awarded by the auction process, not the "High Yield" awarded to competitive bidders, in this case 4.625%, not the 4.720% awarded and a 10 basis point haircut over the life of the bond."

This has to do with bond, and note< trading fundamentals. A bond, essentially, is a contract, called the covenant. The covenant contains the coupon rate, the time and date of repayment of the face value amount, and the underlying asset or obligatory body. These are fixed on all bonds and are priced on day one, at 100% of face value. After that date, the bond trades, and is quoted, as a percent of face value. The best way to describe trading after that is to use the seesaw example. Given that the coupon rate of a bond is fixed, think of the coupon rate as the fulcrum of a seesaw, it doesn't move. Therefore, one side of the seesaw is price, quoted as a percent of face value, and the other side is the yield you would earn.

Gotta pack up, I'm on a train.

Back in a while.

Old Lurker

Mel, when you come back, I was just hung up on the "not the high yield...4.625, not the 4.72...and a 10bp haircut..."

I thought 4.72 WAS the high yield, and the 4.62 was 4.72 less the haircut? In your example, what rate do they get?

I enjoy your tutorials...

How'd that 5/8" one man drywall work out for you?

Melinda Romanoff

Sorry, two hours of software issues at a home business.

The point I was making with the seesaw is as follows. With the fulcrum being the coupon rate, one end of the seesaw is yield, the other being price. When the seesaw is dead flat level, the yield is the same as the coupon, in this case 4.625%, and the price is 100.00, as in 100%. To carry it further, those who received the 4.72% yield at auction, paid less than 100% of face value to receive the higher yield, more like 99.785% (I didn't run the math, but it's on the press release, and I'm doing it from memory).

The long and the short of it is that what I wrote was confusing, my apologies, can't have a not AND a not when showing a choice of only two. NonComps receive the coupon rate, active bid winners get the higher yield, and pay less, like the winning low bid.

I'll cover, reluctantly, the Indirect/Direct morass at a later date. One thing I will tell you about Treasury auctions, nobody ever, and I mean ever, willingly shows their hand, before or after, in any of the auctions. And it goes double in the live markets.

I hope I was a bit clearer this time.

Melinda Romanoff

Oh, and drywall's taped and painted now, thanks. And the cabinets are hung, just got to fabricate the counters.


The financial problems were NOT a "false panic" but a rational issue of bad debts. you bailout idiots have made the problem worse by kicking the can down the road. you should have let Goldman and Citi go tits up a year and a half ago.

You are creating huge issues with the false allocation of capital. Let the bad debts settle. Let insolvents go banlkrupt. Let debtholders take their haircuts.

Old Lurker

Perfect, thanks, Mel. It was the Not and And that tripped me up.


MelR, your tutorials are appreciated.

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