Monday, 23 May 2011 12:09

Greece Reports: "Circular Reasoning Works Because Circular Reasoning Works" - Or - Here Comes That Default!!!

For all of those who felt I was too bearish on the Euro region in 2009 and 2010, thus far nearly every proclamation that I have made has come to light or shown a direct path to doing so. I believe I was unequivocally clear in my assertion that Greece will default at least a year or so ago (even if said default would be marketed by some other name for the sake of political expediency). I would consider this a must read for anyone in the mainstream media reporting on this topic, or any investor/stakeholder who may fear the Grecian domino effect, even if you feel you have seen some aspects of it before.

Well, now its time to call Greece out on its perversely circular  reasoning being used to justify its alleged stance that it will not default. I read a humorously crafted ZeroHedge article this morning which immediately cause the following image to pop into mind...

For more on the origin of said circle, I first refer you to an article ran yesterday in Bloomberg:

Fitch Cuts Greece to B+, Says Voluntary Maturity Extension Is Default:

Greece’s credit rating was cut three levels by Fitch Ratings, which said that even a voluntary extension of its bond maturities being studied by European Union policy makers would be considered a default.


Fitch cut its rating to B+, four levels below investment grade, from BB+ and said that the country could face a further reduction in its creditworthiness. The yield on Greek 10-year bonds rose 57 basis points to 16.6 percent, more than twice the level of a year ago when Greece accepted an EU-led bailout.


“The rating downgrade reflects the scale of the challenge facing Greece in implementing a radical fiscal and structural reform program necessary to secure solvency of the state and the foundations for sustained economic recovery, Fitch said in an e- mailed statement.

... “The B+ rating incorporates Fitch’s expectation that substantial new money will be provided to Greece by the EU and IMF and that Greek sovereign bonds will not be subject to a ‘soft restructuring’ or ‘re-profiling’ that would trigger a ’credit event’ and default rating,” Fitch said.

... “An extension of the maturity of existing bonds would be considered by Fitch to be a default event and Greece and its obligations would be rated accordingly,” Fitch said.


Even if Fitch or other rating companies determined that extending maturities constituted a default, the ruling wouldn’t necessarily trigger credit swaps insuring Greek debt. That decision may be made by the determinations committee of the International Swaps & Derivatives Association.

Yeah, Okay! I guess then maybe when they default it won't really happen?



The country missed its target for last year, reporting a shortfall of 10.5 percent of gross domestic product, versus a goal of 9.4 percent.

The country missed every target for the last four years. For those who read BoomBustBlog, credibility is done, trust (or the lack thereof) is a wrap - Lies, Damn Lies, and Sovereign Truths: Why the Euro is Destined to Collapse!:

Let's take a visual perusal of what I am talking about, focusing on those sovereign nations that I have covered thus far.






Notice how dramatically off the market the IMF has been, skewered HEAVILY to the optimistic side. Now, notice how aggressively the IMF has downwardly revsied their forecasts to still end up widlly optimistic. image018.png


Ever since the beginning of this crisis, IMF estimates of government balance have been just as bad…




The EU/EC has proven to be no better, and if anything is arguably worse!




and the EU on goverment balance??? Way, way, way off.


If the IMF was wrong, what in the world does that make the EC/EU?

The EC forecasts have been just as bad, if not much, much worse in nearly all of the forecasting scenarios we presented. Hey, if you think tha's bad, try taking a look at what the govenment of Greece has done with these fairy tale forecasts, as excerpted from the blog post "Greek Crisis Is Over, Region Safe", Prodi Says – I say Liar, Liar, Pants on Fire!…


Think about it! With a .5% revisions, the EC was still 3 full points to the optimistic side on GDP, that puts the possibility of Greek government forecasts, which are much more optimistic than both the EU and the slightly more stringent but still mostly erroneous IMF numbers, being anywhere near realistic somewhere between zero and no way in hell (tartarus, hades, purgatory…).

Now, if the Greek government's macroeconomic assumptions are overstated when compared with EU estimates, and the EU estimates are overstated when compared to the IMF estimates, and the IMF estimates are overstated when compared to reality…. Just who the hell can you trust these days??? Never fear, Reggie's here. Download our "unbiased, non-captured, empirically driven" forecast of the REAL Greek economy – (subscribers only, click here to subscribe) Greece Public Finances Projections Greece Public Finances Projections 2010-03-15 11:33:27 694.35 Kb. Related banking research can be downloaded here:

Greek Reporter (hat tip to ZeroHedge) reports: Government Finalizes Privatization List

The Greek government will proceed with the acceleration of the privatization of state property and companies, setting a target of at least €15bn by 2015. [Reference the highlights of the BoomBustBlog subscription document below.]
The decisions are expected during the week, probably on Wednesday, at the meeting of the Biministerial Committee on Privatization. The government will finalize a list of companies and property for utilization, which will be presented by Prime Minister George Papandreou to the European leaders in Brussels.
Special Secretary for Privatization G. Christodoulakis and bank representatives have been preparing the content of the list at a meeting yesterday.
National Bank and London-based CC&C Advisors LTD have been assigned the task of financial servicing related to planning, monitoring, coordination and implementation of the restructuring and privatization program.
The Committee will have to approve the award of the of the utilization program to the qualified Greek banks, but also to the consultants who will carry each project.

Sources note that consultants for Athens International Airport have already appointed, while the proposed list includes:
The concession of ports and airports with long-term contracts
• The extension of concession period for Athens International Airport

• The sale of a stake of Public Gas Corporation
• The sale of a 49% stake of Casino Mont Parnes
• The privatization of state lotteries through concessions
• Finding a strategic investor in Hellenic Post
• The sale of a stake of OTE, Hellenic Defense Systems and Larko
• Renewal of OPAP’s licenses
• Licenses for online betting and “slots”
• The concession of Egnatia Odos
• The sale of TRAINOSE
The sale of state stakes in banks (Hellenic Postbank, ATEbank, Consignment and Loans Fund)
• The privatization of water supply companies (EYDAP, EYATH)

This is a tragic Greek comedy. Professional/institutional subscribers should reference the Greece Public Finances Projections Greece Public Finances Projections 2010-03-15 11:33:27 694.35 Kb in its entirety. For those who chose not to subscribe, I am posting excerpts from pages 5 and 6 from said document, don't read this while eating or drinking for fear of spitting up your lunch!

Any subscribers who would have went heavily bearish into these banks when I first commented on the would have done quite well:


As usual, yours truly,

The wielder of the Fiery Sword of Economic Truth, cutting through investment related Bullshit in a country near you!

Last modified on Monday, 11 July 2011 10:29


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  • Comment Link Frank Wednesday, 25 May 2011 12:15 posted by Frank

    Yip and the government as well. All the countries besides China need to devalue their currency at the same time. The only way that I see how to do this is to have wage price inflation. (solvent, not)

  • Comment Link S' Wednesday, 25 May 2011 07:06 posted by S'

    1> remove the cap from fica taxes (to increase tax revenue)
    2> repeal 0bama care (to reduce an uncontrolled expense)
    3> end frivolous law suits (to lower the cost of medical care)
    4> persue medicare/medicaid fraud like 0bama promised & lied about (to reduce expenses)
    5> end the use of corn based ethenol (reduce food costs & increase gas milage)
    Remember FREE costs a lot - sometime before some times after - after costs the most

  • Comment Link Binh Wednesday, 25 May 2011 01:54 posted by Binh

    Basically you're talking about a bailout for main street, not Wall Street, to recapitalize the (solvent) banks from the ground up.

  • Comment Link Frank Tuesday, 24 May 2011 20:56 posted by Frank

    You are correct. The economy would crash if all you did was to raise the minimum wage. Now if you raise the minimum wage and give everyone extra money to spend at the same time the extra money would allow the companies to raise prices without loss of sales and also to expand employment at the same time. A 4X on the minimum wage would mean that everyone working a fulltime job (at the new minimum wage) would be in the market for a $180k house. This should stop the falling of the prices of houses. This should break the housing depression.

    The (US) economy is structured to run on $900billion worth of printed money a year. The world’s monetary base was expanded from $3T to $10T over the last ten years with that money being used to buy debt in the US. As long as we soak up the printed money we can print $900 billion this year next year and the one after that without having hyper-inflation.

    (A $900 billion spike in consumer spending should do wonders for the US economy.)

    With an enforce savings plan you will have enough money hitting the banks to up the reserve requirements by as much as you are printing and avoid destructive inflation.

    Taxing the payment of interest will let conges set the functional interest rates and govern the country.

  • Comment Link Jackson Tuesday, 24 May 2011 14:49 posted by Jackson

    Frank are you serious? If you raised the minimum wage at all, let alone four times its current rate, you would instantly have massive unemployment and the economy would crash.

  • Comment Link Frank Tuesday, 24 May 2011 13:39 posted by Frank

    "Can they do something to save themseves and us?" Maybe. If you up the minimum wage then tax revenue goes up if you don’t have a contraction in the workforce. (In the US I figure about a 4X on the minimum wage would be about right.) If you give everyone money to spend (Printing money is easy to start but hard to stop) then you tend to get full employment. One prime lending rate doesn’t work in the EU. Each country needs to set its own interest rates. So tax the payment of interest on debt. Personal debt, corporate debt, and bank to bank loans as well. This new tax base will help the governments with revenue. Last but not least: If you up the savings rate in your country then you can balance trade. Put a flat tax on everyone that you get back at the end of the year if you buy savings instruments in banks. This will tend to limit domestic consumption and finance exports. If you want a bailout plan that will work this is it.

  • Comment Link Nicholas Biniaris Tuesday, 24 May 2011 03:08 posted by Nicholas Biniaris

    Since 2010 Reggie has predicted more than cerrectly the Greek condition. I published several articles in Greece based on his and other analyst's predictions. Very few lestened. Now, everyone is running scared to cover bases, the government included. The real problem is the EU itself. Can they do something to save themseves and us? EU is itself running scared about an inevitable Greek restructuring. Reggie, keep up the good bur unpleasant work for most of us!!!!

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