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Greece defaults

blogs.reuters.com

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Re: Greece defaults

#111

Post by tsycho »

ristretto wrote: post #92
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…

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?

Not in 30 yrs (more like 60), but India. J. Nehru, followed by his daughter Indira Gandhi, followed by her son, Rajiv Gandhi.

There's even a reasonably good chance that his son, Rahul Gandhi might become a PM in the future, maybe the next one. Ironically, in his case, given the alternatives, many people actually consider this a good thing.

But overall, I agree, such PM dynasties aren't a good thing.

Re: Greece defaults

#112

Post by chollida1 »

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…

> Can someone with more political understanding than I have put all this clusterfuck-shitstorm into perspective for me, please?

Letting Greece into the EU was analogous to marrying someone who you fight with all the time under the assumption that "they will change" once you get married.

Of course Greece didn't really change their spending ways and the fact that we are where we are now is only surprising in that it took so long to happen.

I know a few funds who lost a fair bit of money because they predicted a default too far in advance.

Re: Greece defaults

#113

Post by Loic »

Nearly off topic, but all these debt issues make me think that this is why "world level" currency like bitcoin can be interesting. If it starts to spread enough to reach a critical mass over several economies, this kind of electronic currency can be the only currency disconnected from a single economy. The value of such currency would be function of the volume shared in each economy using it, where economy would be the US, EU, Japan, China etc.

You could say, a bit like gold, but easier to pay with.

Note that I am not saying I endorse bitcoin or any kind of crypto currency and recommend you to exchange your Euros/Dollars for some. For me, it is too speculative at the moment. This is just the concept which I find interesting.

Re: Greece defaults

#114

Post by chollida1 »

ristretto wrote: post #93
mdda wrote: post #44

Earlier quoted context omitted.

The important piece of this is that something has had an 'Event of Default' : That will cause all the Credit Default Swaps (CDS) written against Greek debt to trigger. Banks (mostly European banks, as I understand it) that held Greek debt, but insured it using CDS (written mostly by US banks, ditto), will be able to hand the problem to their counterparties, in exchange for 100%. There may be some very interesting con…

However one must note, out of the $400B or so of greek debt, only $4.8B are CDS-insured. http://online.wsj.com/article/BT-CO-20110708-711764.html

It's important to note, it's not the amount of debt that is CDS-insured but the number of CDS contracts that have been written.

The same 4.8B could have been insured 1000 times.

Re: Greece defaults

#115

Post by chalst »

antimora wrote: post #3

is Greece in default or "kind of default"? I don't see in other headlines news.

There are several different degrees of default, and ratings agencies take into account the severity of possible or past defaults in assigning credit ratings. For instance, Standard & Poor's has the following distinction [1]:

> An obligor rated 'SD' (selective default) or 'D' has failed to pay one or more of its financial obligations (rated or unrated) when it came due. A 'D' rating is assigned when Standard & Poor's believes that the default will be a general default and that the obligor will fail to pay all or substantially all of its obligations as they come due. An 'SD' rating is assigned when Standard & Poor's believes that the obligor has selectively defaulted on a specific issue or class of obligations, excluding those that qualify as regulatory capital, but it will continue to meet its payment obligations on other issues or classes of obligations in a timely manner. A selective default includes the completion of a distressed exchange offer, whereby one or more financial obligation is either repurchased for an amount of cash or replaced by other instruments having a total value that is less than par.

According to this definition, Greece is SD, and S&P has rated this credit event so.

Felix Salmon is very much a "default is default, even if it means making a coupon payment one day late" kind of person: he is not using weasel words here.

[1]: http://www.standardandpoors.com/ratings/articles/en/us/?asse...

Re: Greece defaults

#116

Post by [deleted] »

mbateman wrote: post #110

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 d…

[deleted]

Re: Greece defaults

#117

Post by _delirium »

richardw wrote: post #81
joe_the_user wrote: post #56

Earlier quoted context omitted.

Wait a gosh-darn-second - if the situation is either definite default OR not-a-default, then Greece has NOT defaulted. From the article: if you’re a holder of Greek bonds right now, you have three choices... 1. You can do nothing, and hope that Greece pays you in full and on time. (and other stuff)... The first option is by far the most interesting. No one has come out and said that Greece is going to default on bond…

The ratings agencies have said that arm-twisting bondholders to accept new bonds with less favourable conditions amounts to a default. I promise to pay you $100 tomorrow. I then tell you you'll get your money in 30 years and at a much lower interest rate. That's breaking the original promise, even though I haven't actually 'not paid you back'.

I don't think it's a default in that example until tomorrow comes and I fail to hand over the $100. Until then we're just negotiating and speculating about whether I will or won't hand it over.

Re: Greece defaults

#118

Post by vladd »

latch wrote: post #39
frossie wrote: post #29

Earlier quoted context omitted.

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 in…

But that's not what's happening at this moment. If you choose to do nothing, you still keep your $1.00 debt. Until now, Greece didn't miss a single payment. It's not making it mandatory to accept the 20% cut. It's not downgrading any promise for holders that choose to do nothing. Nor did it fail to pay its matured debt until now.

It's just offering additional guarantees (which were not present in the initial debt agreement) at a specific cost (a 20% cut or a longer maturity date) for those that want to enter willingly into such transactions.

Re: Greece defaults

#119

Post by _delirium »

illumin8 wrote: post #109
frossie wrote: post #29

Earlier quoted context omitted.

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 ha…

An interesting angle along those lines is: given the mostly unregulated nature of the CDS market, do they even all have the same conditions for "default"? Is it possible that some CDS contracts are worded more liberally than others?

Re: Greece defaults

#120

Post by [deleted] »

marshray wrote: post #67
mdda wrote: post #48

Earlier quoted context omitted.

If I were worried about this point (and a holder of a lot on CDS 'insured' bonds), I'd get a friend that was immune to 'arm twisting' to buy 1MM of a particular issue, and play extremely hardball with the ECB. Eventually, a payment would not occur, and there would be a solid 'Credit Event' to trigger all the CDS.

NYT: "Holders of short-term obligations would be able to swap their notes for debt with longer maturities and backed by high-rated bonds. An organization that includes most major European banks said its members would accept the offer and expected 90 percent of all Greek bonds to be exchanged. [...] financial institutions that own Greek bonds would effectively contribute 54 billion euros through 2014, largely by accep…

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