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Greece defaults

blogs.reuters.com

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Re: Greece defaults

#31

Post by jeffreymcmanus »

baguasquirrel wrote: post #24
ugh wrote: post #16

Earlier quoted context omitted.

The question you have to ask yourself is “What does it mean?” Will readers understand what “Greece Defaults” entails? If not, then it’s the journalists job to write something else. A semantic argument won’t help you there. If it were my job to write articles about the situation I certainly wouldn’t pick “Greece Defaults” as a headline. I would mention the default in the body and explain what that actually means. Cont…

It just means that instead of having the train quickly derail, they're going to stretch it out like it were a Hollywood movie. Seriously. No one believes that debt is going to be repaid. The politicos are just praying that the train doesn't hit the ground on their watch. If you read the text of this, it just "says" they're going to extend all the terms. But we all know the truth. Shit is going to happen. If for no re…

There is no such proposal to "practically indefinitely extend the terms". Do you actually know anything about this or are you making all this up?

Re: Greece defaults

#32

Post by jeffreymcmanus »

baguasquirrel wrote: post #30
jeffreymcmanus wrote: post #26

Earlier quoted context omitted.

Wrong. The way it appears now, the debt is going to be repaid over a longer period of time. Your confusion about this indicates that writers are not doing a good job explaining this to people.

Even if it does get repaid over a longer period, this more or less means those bonds are shot as an investment. Moreover, this means that no one is going to lend the Greek gov't any more money. I didn't see any terms in the agreement where they said they'd be lending the Greeks more money. That means the government is going to stop working. Or Greece will exit the Eurozone. The Greek gov't could of course cut all the…

That remains to be seen; they aren't going to access the global credit market for at least few years anyway because they have too much debt to begin with.

But the existing bonds still have value and they'll still be held as investments. It's not like the whole country has collapsed and the value of its debt is worthless. A haircut is just that, a downward adjustment in the value of the debt.

It's inane to think that Greece will exit the Euro zone because of this. The Euro zone is the only thing keeping them going at this point.

Re: Greece defaults

#33

Post by baguasquirrel »

jeffreymcmanus wrote: post #31
baguasquirrel wrote: post #24

Earlier quoted context omitted.

It just means that instead of having the train quickly derail, they're going to stretch it out like it were a Hollywood movie. Seriously. No one believes that debt is going to be repaid. The politicos are just praying that the train doesn't hit the ground on their watch. If you read the text of this, it just "says" they're going to extend all the terms. But we all know the truth. Shit is going to happen. If for no re…

There is no such proposal to "practically indefinitely extend the terms". Do you actually know anything about this or are you making all this up?

"30 years, and accept a modest coupon of 4.5%", I rest my case. This is comical.

Re: Greece defaults

#34

Post by tsotha »

TheAlan wrote: post #13

The raping of Greece's assets will now begin. EVERYTHING will get privatized, just like a third-world country.

Well, sure. Greece is a third-world country. And when you owe more than you can pay you have to cough up some assets.

Re: Greece defaults

#35

Post by marshray »

achompas wrote: post #20
narrator wrote: post #6

Earlier quoted context omitted.

Whether they defaulted or not is actually quite key. You see, all the CDS (Credit default swap) holders get to demand the full face value of the Greek debt they hold from the CDS seller if Greece has defaulted. The CDS writers are going to take a huge bath if this happens. This is what took down AIG, except in that case it was subprime MBS (Mortgage backed securities) CDSs that did it.

This is an excellent question--I'm also curious to see how CDSes are affected. Logic dictates the EU would structure this bailout so that, no, CDSes cannot be redeemed, lest we see a bunch of insurers go under as well.

You can bet there are a lot of people making phone calls right now trying to figure this out. My guess is that nobody knows at this point.

If this so-called "selective default" does end up being "structured" such that markets are surprised when CDSs cannot actually be invoked, then that erosion of confidence in the system itself might end up fueling a cascade failure even worse than simple direct failure of some insurers.

Re: Greece defaults

#36

Post by shareme »

Translation...Greece gets a bailout for itself, bondholders offered bailout if they commit to increase time-periods of loans, Greece bond rating gets clobbered to default rating....

Re: Greece defaults

#37

Post by teyc »

Greece has been in fiscal deficit for so long, a loan which stays on the books but never gets paid off reminds me of CPS where functions never return.

Re: Greece defaults

#38

Post by marshray »

parallel wrote: post #21

As I understand it you default on a loan, you don't default as an entity. So it's doesn't really make sense to talk about Greece defaulting without saying which loans they defaulted on. Hence the "kind of"/"selective" etc. I read this as Greece defaulted on kind of all it's loans, so defaulted on some and not on others. The others may have been renegotiations, longer terms etc.

Apparently investors were fond of thinking that Greek debt was as safe as any in EU because it was backed by the Germans.

This seems not unlike the belief that Fannie Mae/Freddie Mac were effectively backed by the US Treasury. In the the US scenario these investor beliefs have been upheld by bailouts.

But in the Greek situation, this bet was just now shown to be wrong. The open question is just how big of a house of cards has been built upon this assumption.

Tomorrow is going to be a busy day for a lot of people.

Re: Greece defaults

#39

Post by latch »

frossie wrote: post #29
jeffreymcmanus wrote: post #14

Earlier quoted context omitted.

So you're making a semantic argument, which is, you know, great, but surely there's a difference between the relatively modest haircut that's going on here and the kind of classical default in which little or none of the debt gets repaid? The author of the piece writes as if Greece is getting off scot-free here. Is not aware of the manner in which mobs have been rioting there for the past month? This is not a pleasan…

As far as I can see in other reporting, it's something of the order of a 20% write down (at least for the German Banks) with the EU buying up some of the bonds and the terms being extended to 15 and 30 years. In other words, it is not clear that how this is a default. In fact The Guardian says: German government sources said they had received assurances from the international ratings agencies that they would not rush…

The headline isn't dramatic. Credit rating agencies likely will consider this a default. The article explains it pretty plainly:

But that won't stop the credit rating agencies giving Greece's bonds a default rating — this is a coercive deal, which clearly reduces the value of banks' Greek debt. (After all, just look at those haircuts.)

A default is when you fail to fulfill your obligations. If I owe you $1.00, but instead pay you $0.80 (1 year late)...I didn't fulfill my obligation to you, and it's fair to consider me a credit risk.

Or, put another way, people who declare personal bankruptcy don't do so because they can't pay _any_ of their debt, they do so because they can't pay _all_ of it.

Re: Greece defaults

#40

Post by latch »

dialtone wrote: post #19
flocial wrote: post #12

The EU sort of rescued Greece, now Greece sort of defaults. Portugal, Spain, and Italy are not that far behind. The biggest problem, aside from Greece's fiscal mess, is that Germany can't muster up enough political support to clean up after their mess more decisively despite the fact that they are now in the same monetary union. The catch 22 of these financial crises is that inaction will result in financial meltdown…

Delayed action though leads to speculation and uncertainty as was shown in the past few weeks. Nothing changed in the Italian economic policy since friday last week, but monday and tuesday brought deep losses and the Italian BTP bonds reached the highest spread against the Bund in recent history. Today, 3 days later, Italy is back to a less crazy spread (still pretty high) and _nothing_ changed in its policy, 100 bas…

There are benefits to delayed actions..it helps people/banks/countries prepare for when unpleasant actions are required. In this specific case, it seems (from reading) that they are trying to buy time to make sure Spanish banks can mean newly set (and much needed) capital requirements.
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