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Posts tagged ‘Default (finance)’

“We Need To Stop Allowing Secretive Banking Cartels To Endlessly Enslave Us”

by Tyler Durden of the zerohedge.com

Debt Ceiling Drama

First of all, politicians need to understand that without real change default is inevitable.  In fact, default happens every day through  monetary policy tricks.  Every time the Federal Reserve engages in more  quantitative easing and devalues the dollar, it is defaulting on the  American people by eroding their purchasing power and inflating their  savings away.  The dollar has lost nearly 50% of its value against gold  since 2008.  The Fed claims inflation is 2% or less over the past few  years; however economists who compile alternate data show a 9% inflation rate if calculated more traditionally.  Alarmingly, the administration  is talking about changing the methodology of the CPI calculation yet  again to hide the damage of the government’s policies. Changing the CPI  will also enable the government to avoid giving seniors a COLA (cost of  living adjustment) on their social security checks, and raise taxes via  the hidden means of “bracket creep.”  This is a default.  Just because  it is a default on the people and not the banks and foreign holders of  our debt does not mean it doesn’t count.

full article at source: http://www.zerohedge.com/article/ron-paul-debt-ceiling-drama-we-need-stop-allowing-secretive-banking-cartels-endlessly-enslav

POSTPONING GREECE’S INEVITABLE DEFAULT

Donal Buckley

saw this on the FT Blog “The A-List”, and thought you would be interested.

POSTPONING GREECE‘S INEVITABLE DEFAULT

A default by the Greek government is inevitable.  With a debt to gross domestic product ratio of more than 150 per cent, large annual deficits and interest rates more than 25 per cent, the only question is when the default will occur. The current negotiations are really about postponing the inevitable default.

But Greece is not alone in its insolvency and a default by Athens could trigger defaults by Portugal, Ireland and possibly Spain.  The resulting losses would destroy large amounts of the capital of banks and other creditors in Germany, France and other countries. There would be a drying up of credit available to businesses throughout Europe and there could be a collapse of major European banks.

http://blogs.ft.com/the-a-list/?p=3356

The following personal message was included:

“Here is a clear, concise analysis of our economic situation.

We sit tight and wait for the ECB to inform us of the timing for a concerted default.

There is hope in this perspective, miracles may happen if we wait for the ECB command.”

 

===================================================
“FT” and “Financial Times” are trademarks of the Financial Times.
Copyright The Financial Times Ltd 2011

http://www.ft.com/home/europe

Credit default swaps and treason in Greece

The revelations of Credit default swaps and treason in
Greece should start to flash red lights here in Ireland as there are enormous
movement in Irish credit default swaps spreads. With well placed insiders are
able to make huge money and nobody is calling for a public enquire, these financial
instruments of mass destruction are been used and nobody knows who’s benefiting
from them!

Are we not going down the obvious road to default because of
a conflict of interest by those that are charged with this decision??? How do
we know that special interests are not been looked after???

Can we thrust our politicians? I know what my answer is !

AIB has already defaulted see here

The International Swaps and Derivatives Association (ISDA) yesterday said that   a “credit event” had occurred on Allied debt, meaning the bank has   effectively defaulted on its debt, a situation the Irish government has gone   to extreme lengths to avoid.

Credit default swaps (CDS) sold on Allied subordinated bonds and, crucially,   its senior debt, have been activated by the decision of the ISDA   determinations committee that decides whether a borrower has defaulted.

The decision by the committee, which is made up of 10 major banks, follows the   announcement earlier this month by the Irish High Court of a “subordinated   liabilities order” that changed the terms under which junior debt in   Allied was originally sold, forcing holders of the bonds to accept an   extension in the maturity of the debt to 2035.

Allied had already missed a coupon payment on its Lower Tier 2 debt. However,   changes in the law enabled the bank to avoid being forced to be formally   placed in default.

For the market, ISDA’s decision renders this move largely irrelevant as it   means the bank will be categorised as in default in the eyes of investors.(source http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8590428/Allied-   Irish-Bank-has-defaulted-says-derivatives-body.html  )

Reggie on the ECB’s Continued Solvency After Sovereign Debt Buying Binge, Guess What!

By Reggie Middleton

There has been a lot of noise in both the alternative and the mainstream financial press regarding potential risk to the ECB regarding its exposure at roughly 48 to 72 cents on the dollar to sovereign debt purchases through leverage, and at par at that. This concern is quite well founded, if not just over a year or so too late. In January, I penned The ECB Loads Up On Increasingly Devalued Portuguese Bonds, Ensuring That They Will Get Hit Hard When Portugal Defaults. The title is self explanatory, but expound I shall. Before we get to the big boy media’s “year too late” take, let’s do a deep dive into how thoroughly we at BoomBustBlog foretold and warned of the insolvency of both European private banks and central banks, including the big Kahuna itself, the ECB! The kicker is that this risk was quite apparent well over a year ago. On April 27th, 2010 I penned the piece “How Greece Killed Its Own Banks!“. It went a little something like this:

Yes, you read that correctly! Greece killed its own banks. You see, many knew as far back as January (if not last year) that Greece would have a singificant problem floating its debt. As a safeguard, they had their banks purchase a large amount of their debt offerings which gave the perception of much stronger demand than what I believe was actually in the market. So, what happens when these relatively small banks gobble up all of this debt that is summarily downgraded 15 ways from Idaho.

Well, the answer is…. Insolvency! The gorging on quickly to be devalued debt was the absolutely last thing the Greek banks needed as they were suffering from a classic run on the bank due to deposits being pulled out at a record pace. So assuming the aforementioned drain on liquidity from a bank run (mitigated in part or in full by support from the ECB), imagine what happens when a very significant portion of your bond portfolio performs as follows (please note that these numbers were drawn before the bond market route of the 27th)…

The same hypothetical leveraged positions expressed as a percentage gain or loss…

Relevant subscription material for BoomBustBlog paying members:

  1. Greece Public Finances Projections
  2. Banks exposed to Central and Eastern Europe
  3. Greek Banking Fundamental Tear Sheet

Online Spreadsheets (professional and institutional subscribers only)

       Greek Default Restructuring Scenario Analysis

       Greek Default Restructuring Scenario Analysis with Sustainable Debt/GDP Limits and Haircuts

Several months later I posted several follow-up pieces along the same vein:

To Cut or Not to Cut, The Irish Threaten To Play Rough With Those Clippers: Threats of Haircuts Rattle the ECB! Thursday, March 31st, 2011

       A Comparison of Our Greek Bond Restructuring Analysis to that of Argentina Wednesday, May 26th, 2010

For our professional and institutional subscribers, the Ireland Default Restructuring Scenario Analysis with Sustainable Debt/GDP Limits and Haircuts are available online. All subscribers have access to the  Irish Bank Strategy Note which adequately warned before Irish banks dropped 85% in value. The  Ireland public finances projectionsis also available to all paying members.

To continue reading the full article and much more please follow link to source:

 http://boombustblog.com/reggie-middleton/2011/06/09/over-a-year-after-being-dismissed-as-sensationalist-for-questioning-the-ecbs-continued-solvency-after-sovereign-debt-buying-binge-guess-what/

Comment:

The Irish government spends millions every year on financial advisers I suggest they instead pay Reggie to advise then better still Reggie should be Finance Minster. I have been following his observations and conclusions for three years now and I only wish I had heard of him earlier. There is no substitute for the real facts and the truth!

Thank God there are people like this man around; otherwise the small investors would be history. Great article Reggie and Thank you .

Paul Maher sends us this mail

By

Paul Maher

To my mind, walking away from or defaulting on a mortgage in negative equity, makes perfect personal
economic sense. You survive. You learn. You live to fight another day without the millstone around your
neck. No longer would you have the crushing weight pounding and squeezing your head. Best of all, in the
event of your premature demise, your wife and children would not be saddled with the debt.
 
Now, imagine you are Ireland and you’re married to Brian Cowen. Brian insists on doing the “honourable”
thing and continues making payments on the Negative Equity Senior Bond ( NESBO). Unfortunately, for
you, Brian is getting a divorce in March and leaving you, Ireland his wife, and us his children, stuck with
this NESBO. Imagine your surprise when you find out that a Senior Bond holder, Goldman Sachs, uses
your Four billion euro payment to help fund it’s Ten billion euro  Employee Bonus  Plan. That’s right.
Goldman Sachs has used your money to help pay this outrageous bonus to it’s employees. GS is only
one Bondholder. Think of the good use the other Bondholders will put your childrens money to !!
 
There is no dishonour in defaulting on this Odious Debt. But how would a career politician with no life
experience or backbone  know that?
 
Paul Maher, Roscrea, Co.Tipperary

Comment:

I agree with you Paul on this one

machholz

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