Greece is bankrupt. They can't make payments on their debt. Of course, if you continually issue someone new bonds at artificially low rates, it can be extended indefinitely. However, Greece's insolvency is so severe that people can't ignore it.
Technically, if you keep lending Greece more and more money, they'll never go bankrupt or default. However, if you go to far, the monetary system farce becomes too obvious. Insiders had to do something.
Why is government debt sacred? Why not default? The banksters make a lot of money buying and selling government bonds. It's practically riskless profit, borrowing at cheap rates from the central bank, and buying higher-yielding government bonds. When a government defaults, the scam starts to unravel. If you borrow at 1% and lend at 2% and use 100x leverage, then you make a fortune. If there's a default, then all of a sudden the easy riskless profit disappears and you're bankrupt.
If banks are "too big to fail", then bailing out an insolvent government is an indirect bank bailout. Either the government defaults and then you bail out the bank, which would be too obviously corrupt. Instead, you bail out the government, indirectly bailing out the bank.
Why is government debt sacred? If you lend money to someone who can't pay, then you deserve to lose. Why was that principle abandoned? A higher principle takes precedence, which is "The banksters make a lot of profit no matter what." Bank lobbyists take precedence over sound economic principles.
There's been a lot of wrangling and dealing, regarding the fine print of Greece's restructuring/default/bankruptcy. How are insiders going to make a fortune? Do you see it?
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Suppose that I had inside information, regarding the exact details of the Greek bailout. Then, I could profitably buy or short sell Greek bonds. If the bailout is more generous to bondholders than expected, then I can buy Greek bonds and make a fortune. If the bailout is harsher to bondholders than expected, then I can short sell and make a fortune.
You can be sure that some insiders know exactly what's going to happen, and are making a fortune speculating in Greek bonds.
Sunday, October 16, 2011
How Did Insiders Profit From The Greek Bailout?
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2 comments:
steamroller says:
The premise is partly true.
A- "You can lend Greece more and more money and technically they'll never go bankrupt or default.
B-But at some point YOU WILL....
C-When you are tapped out and everybody else sees you lost your ass lending to Greece, they, too will pass on loans to Greece and then you and Greece will share the misery.......
No, steamroller. Central banks have an unlimited budget. Governments can have arbitrarily large deficits, as long as the central bank keeps lending them money.
In the USA, the Federal government can keep borrowing from the Federal Reserve and financial industry, no matter how big the deficit.
In Europe, there's a similar arrangement with the ECB.
The only limit is that the monetary system completely collapses in hyperinflation. Until then, you can keep printing more and more money to finance bailouts.
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