Bagholders Of The World Unite

Now that everything is all right with Greece again. Can everyone just go back to buying Equity Futures? I mean if S&P has affirmed Greece rating at BBB+, this only means that Greece is off to the races once again correct? So is it safe to say that S&P will only look to downgrade Greece if they reach 500B in debt? Till then is everyone safe in Europe? Why would Greece default now when S&P has just given them the green light to add a couple hundred more billions in debt? Look for more Greek Bond issuance in the coming weeks and months. Only after some 50-100B in extra debt issuance will Greece formally default. You can be assured that they will then blame all of the speculators for their default. Greece is doing a Russia in the sense that they will issue more worthless debt to the same clowns that bought all of the prior worthless debt. It’s just a matter of time before the inevitable default happens. When that happens Greece will de-link from the Euro and the Euro will wave bye bye!

But for the time being…

….Does this means that the markets can just shrug off sovereign debt issues along with the Dubai Debt incident last November? From watching the talking heads on CNBC and Bloomberg that is exactly what they are saying.

All we have heard over the last few weeks is this:

http://www.guardian.co.uk/world/2010/mar/12/eu-agrees-greece-bailout

Then this:

http://abcnews.go.com/Business/wireStory?id=10091357

Then these items:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aKGVY62QnP.g&pos=4

http://online.wsj.com/article/SB10001424052748704131404575117963361743800.html?mod=WSJ_Markets_section_WorldMarkets

So the question remains: Will Germany which is the strongest and largest European country bailout Greece now or just wait it out and let them default on their own?

All quiet on the Gyro Front.

If there was going to be a bailout of Greece, it would have happened all ready. But since Greece has raised some 5B the need for an immediate bailout is not needed.

Also the ECB is looking into creating a European Monetary Fund to soak up all of the excess bonds that nobody wants. Jean-Claude Trichet has already stated:

"We have seen the proposal. I would say it deserves examination about creating a body for European nations kin to the IMF.”

Well, all the IMF really is in its simplest form is a bailout entity. Once the IMF comes in, its restructure and default time.

Let’s get something straight. All this amounts to is a bailout mechanism along the lines of TARP. The Europeans know that Greece can’t get their austerity measures to the point where their finances are running of the cliff. So there is two choices for Greece, Default or Bailout. The Germans along with the French citizens have no stomach for bailouts. There would be riots in their countries because unlike America, there is no American Idol to fool the public. So the ECB is trying feverishly for a back door bailout ala AIG/GS. They like everyone else on the planet knows that Greece is going to default. After all Greece has been in a state of default for decades. It was only after their CDS blew up that people noticed. Sovereign countries are like people. From my experience you should never lend money unless you can then turn around and sell that loan to some other guy who is as stupid as you. The idea of the bagholder is a central theme in modern financial markets and within capitalism itself. This is what true innovation is. Financial innovation doesn’t work if we don’t have bagholders. S-CDO’s wouldn’t have worked without AIG being the dumping ground for Goldman Sachs. This is the main purpose of Financial Innovation. This is the reason the banks don’t want an independent CFPA. The US Tax Payer doesn’t want to be the bagholder, patsy, or the Oswald anymore, but the banks need more and more people in the Texas School Book Depository to hang around and look like idiots. In its simplest form, innovation is a tool that they use to obscure what’s really going on to create more bagholders.

We all know that Greece lied about their finances to join the Eurozone with a little help from Goldman Sachs. Normal people who lie to gain access to a club would get kicked out, but you see while they were in this club they proceeded to pump up French and German banks with their bad debts. I am not letting these banks off the hook, they know what they are doing, but since the Europeans cannot afford a second crisis at this very moment because frankly they never fixed the first one correctly is the reason for all of these shenanigans. The last thing the French and Germans want is a wholesale bailout of Greece. It’s not like this in the USA. In the US, if people start to panic, we have planes flying into the IRS and people shooting off guns, so the government does its best to keep people in a mass confusion. The Europeans starting an EMF is like the US version of TARP but with an American Idol angle to it. They are trying to keep the focus off of what their own governments are doing long enough to screw you.

With the S&P affirmation it’s quite simple what needs to be done. Create a short squeeze not only in Greek debt but in global equities. So that European and Wall Street banks can offload their bad bets unto unsuspecting bagholders. This will only lead to a much worse unraveling later on but as long as Goldman Sachs is saved it’s all good. One thing is certain as the day is long. No matter what nationality, creed, race, or religion policy makers are, their desire to extend and pretend is the one constant. Obama knows that the deficits are unsustainable. He surely knows that current policies are inherently flawed. This is why he has ordered Bernanke and Geithner to make sure it blows up for the next guy.