Greece defaults • Hacker News Board

Re: Greece defaults

#101

Post by ry0ohki » Fri, Jul 22, 2011, 11:25 AM UTC

RyanMcGreal wrote: post #97

ristretto wrote: post #92

Earlier quoted context omitted.

Here's my remarks about how the greek political system works: - Greece is a very recently established democracy (1974), before that greece was like a protectorate, due to a strategic positioning in the edges of the western-eastern block. - As such, previous generations used to see the state as 'the bad guy' whose raison d'etre was to oppress citizens and maintain class inequality. So it's natural to always try to che…

> Are there many developed countries where father, son and grand-son, or uncle and nephew ALL become PMs in the past 30 years? The United States springs to mind: George H.R. Bush, Jeb Bush, George W. Bush.

To be fair Jeb Bush hasn't been president, and there are relatively few dynasties in the US (there's also the Kennedy's, the Gore's, the Paul's, but most don't make it to be President)

Re: Greece defaults

#102

Post by kahawe » Fri, Jul 22, 2011, 11:37 AM UTC

speedracr wrote: post #99

kahawe wrote: post #89

What I can still not understand: how could this have happened at all and how come just like with the financial crisis following the housing bubble, it is nobody's fault really, nobody gets the blame and has to answer and step down and get locked up for it... and ultimately banks or the countries just get their bail-out and that's it. Few months from now life will just continue as usual as if nothing ever happened, ju…

blame whoever was responsible for accepting Greece into the monetary union in the first place when they downright faked their economic statistics and obviously noone did any due-diligence? This is a case where blind hope was supposed to triumph over facts (- hey, it's politics, right?): the deficiencies of Greece's economy were known to everybody but if Greece hadn't "tweaked" its statistics, it wouldn't have been po…

Yes, it just comes down to greed and so far, I can follow. The point I do not understand is.. when that blind greed goes horribly, horribly wrong then nobody has to answer and everybody gets bailed out and nothing happens against that.

That's like playing Russian roulette but instead of you, the casino's cleaning personal takes the bullet and you get a handful of cash and "strangely" enough, more and more people join to play on that table...

> hey, it's politics, right?

You summed it up PERFECTLY and couldn't hit the nail more on the head: WHY do we as the people take this kind of abuse and say something like "hey, it's politics, right?". It is basically a widely accepted fact that politicians are corrupt and recent politics is nothing but a PR and media show.. and nothing happens.

It is just wrong.

Re: Greece defaults

#103

Post by ristretto » Fri, Jul 22, 2011, 11:37 AM UTC

RyanMcGreal wrote: post #97

ristretto wrote: post #92

Earlier quoted context omitted.

Here's my remarks about how the greek political system works: - Greece is a very recently established democracy (1974), before that greece was like a protectorate, due to a strategic positioning in the edges of the western-eastern block. - As such, previous generations used to see the state as 'the bad guy' whose raison d'etre was to oppress citizens and maintain class inequality. So it's natural to always try to che…

> Are there many developed countries where father, son and grand-son, or uncle and nephew ALL become PMs in the past 30 years? The United States springs to mind: George H.R. Bush, Jeb Bush, George W. Bush.

Is it like a political tradition that grandsons must bring the country to financial collapse?

Re: Greece defaults

#104

Post by tybris » Fri, Jul 22, 2011, 11:42 AM UTC

This is called debt restructuring, not defaulting.

Re: Greece defaults

#105

Post by blumentopf » Fri, Jul 22, 2011, 11:45 AM UTC

forgottenpaswrd wrote: post #88

chailatte wrote: post #17

Earlier quoted context omitted.

82 Million Soon To Be Very Angry Germans, Or How Euro Bailout #2 Could Cost Up To 56% Of German GDP http://www.zerohedge.com/article/fatal-flaw-europes-second-b...

Not that simple, do you know where much of the money from Greece has gone all this years? Weapons developed by Germany, and German industrial products bought with loans by Greeks, like cars, cranes and bulldozers. Do you know witch country benefits from a weak euro so the can export a lot?

Germany has basically subsidized its formerly East-German states for 20 years now. Very much comparible in my opinion. After reunification, most East-German companies were not competitive (in large part due to the 1:1 exchange rate between East-Mark and DMark which was chosen for political reasons) and they never really catched up. But for West-German companies, it's a nice market to sell their products.

The real problem is that there are or will be efforts by the EU to persuade e.g. Greece to heighten the retirement age, or Ireland to increase corporate taxes -- without proper democratic legitimization. That's scary.

Re: Greece defaults

#106

Post by guan » Fri, Jul 22, 2011, 11:49 AM UTC

lefstathiou wrote: post #11

FYI there is no such thing as a "kind of" or "selective" default. It's binary. You either pay back creditors what they are owed or you dont. It's rare that a company or country defaults on ALL obligations all at once. As a member of Wall Street, I appreciate the WSJ's noble attempt to sugar coat this (article below) but that doesnt change the facts. Ditto watchandwait below.., glad it finally happened. http://profess…

I would argue that there is such a thing as “kind of” default. Consider a couple of scenarios and think about whether it’s a default in a “common sense” sense, whether a ratings agency would/should consider it a default or selective default, and whether it would/should be treated as a default under CDS contracts:

1) Debtor simply stops paying interest or principal.

2) Debtor makes a voluntary exchange offer, offering new debt that is generally considered to offer _better_ terms (e.g. higher interest rate but longer maturity). 90% of creditors accept.

3) Debtor makes a voluntary exchange offer, offering new debt that is generally considered to offer _worse_ terms (e.g. same interest rate but longer maturity). 80% of creditors accept, perhaps because they think it’s better than an actual default later.

4) The debt contract has a collective action cause saying that if 2/3 of creditors accept, an exchange offer is binding on everyone. 2/3 of creditors accept an exchange offer that offers worse terms.

5) Debtor makes a voluntary exchange offer. The central bank announces that a month after the exchange offer replies are due, it will stop accepting the old debt as collateral for loans by the central bank and will only accept the new debt as collateral.

Would you say that all of these are default and there are no gray areas?

Re: Greece defaults

#107

Post by ristretto » Fri, Jul 22, 2011, 11:51 AM UTC

speedracr wrote: post #99

kahawe wrote: post #89

What I can still not understand: how could this have happened at all and how come just like with the financial crisis following the housing bubble, it is nobody's fault really, nobody gets the blame and has to answer and step down and get locked up for it... and ultimately banks or the countries just get their bail-out and that's it. Few months from now life will just continue as usual as if nothing ever happened, ju…

blame whoever was responsible for accepting Greece into the monetary union in the first place when they downright faked their economic statistics and obviously noone did any due-diligence? This is a case where blind hope was supposed to triumph over facts (- hey, it's politics, right?): the deficiencies of Greece's economy were known to everybody but if Greece hadn't "tweaked" its statistics, it wouldn't have been po…

While the financial facts presented from greece to the eurozone before acceptance were definately massaged, that was not criminal-level fraud. Other countries had massaged their financial data as well (hint: Italy) to fit into the euro criteria (which, to be frank were quite strict). Things took the wrong turn in greece AFTER acceptance to the EU: the inflow of relatively cheap euros led to a construction boom (yes, a construction boom in a country which has the highest home-ownership in europe, but negligible industry) and massive imports of foreign goods (Not just from germany, in fact german imports were rather low). Then corruption started settling in, in a state that always looked the other way and hid everything under an (apparently huge) rug, and made no attempt to modernize and grow the economy.

As for people trying to make reforms in greece, see this article from 2007: http://www.athensnews.gr/old_issue/13235/16152

Re: Greece defaults

#108

Post by orenmazor » Fri, Jul 22, 2011, 12:11 PM UTC

everybody is concentrating about the loans, but there was nothing being said on the lack of social contract in Greece. sure, they get some more loans/time, but the fact remains that the greek dont seem to want to pay their taxes.

Re: Greece defaults

#109

Post by illumin8 » Fri, Jul 22, 2011, 12:16 PM UTC

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…

Right, the headline is a little dramatic.

I think the ECB was extremely careful in the crafting of this deal to do everything possible to NOT trigger a technical default. A default is a delay or missing any coupon (interest) payments or failing to pay back a bond upon it's redemption date.

The reason why it is so important that Greece not default is that a huge amount of hedge funds and other speculative investors have purchased CDS guaranteeing Greek bonds will not default. Because the CDS market is completely unregulated, we don't know how many billions or hundreds of billions in bets have been placed on a Greek default. In fact, even people that don't even own Greek bonds could purchase a CDS guaranteeing a payout if Greece defaults.

In other words, if Greece does legally default by delaying any coupon payments or failing to pay any creditors, the ripples caused by all of the highly leveraged CDS could create another Lehman like scenario where large US and foreign banks don't have the capital reserves to cover all of the bets.

The real crime in all of this is that the CDS market is still completely unregulated and the hedge funds are legally allowed to bet on this. The real world equivalent would be that you're allowed to take out a fire insurance policy on your neighbors house, and then proceed to smoke cigarettes and flick the lit butts at his house, hoping to spark a flame. The hedge funds do this every day by taking out CDS and then proceeding to short Greek bonds. If they can panic enough investors into running for the exits, they can trigger a default and become rich.

Re: Greece defaults

#110

Post by mbateman » Fri, Jul 22, 2011, 12:21 PM UTC

From the info box on this story in the print edition of the WSJ article this morning:

---

Q:There has been concern about a "credit event" that could trigger payouts on credit default swaps, a type of insurance against default. Will this happen?

A: Probably not. The deal for private-sector contributions is voluntary. If a deal doesn't bind all bondholders, it's unlikely to be considered a credit event.

Q:What use is default insurance if there's a default and no payouts?

A: Good question. It may lead to some soul-searching in the CDS market.

---

So the financial instruments designed to insure against default are being bypassed by deliberately circuitous arrangements and language, to the point that people are wondering what they are even for anymore? That sure seems like strong evidence in favor of the OP's position.