Greece activates EU/IMF package

[orbit]

You can either bet on Greece to pay off their debts, ie lend them money at the bond rate, or you can invest your money in options or dertivatives on a default. You can also short Greece, ie buy a greek bond option now at a rate higher than currently which triggers at a lower rate. Basically its a bet with someone else on the market who has greater confidence than you do. If it defaults or looks likely then these options trigger and you get the difference or spread between the rates. See, its simple.

I understand the principles. What I'm wondering about is the existence or size of the markets you're talking about. Who is (or was before this crisis) interested in buying options on Greek bonds? How liquid is the market for derivatives on Greek bonds? Any figures? Or are we talking about Paddy Power type betting exchanges here?

I heard David McWilliams on the radio at lunchtime say that the only market that's really liquid enough, for speculators to offer their opinions on the bailout is the euro currency market. And that would be a rather blunt instrument. If the euro dropped closer to parity with the dollar, I suspect it wouldn't be seen as altogether a bad thing by many people.

[Cassandra Syndrome]

I don't understand why people are actually calling for Ireland to reject this package. Will it be better for us to let Greece go bankrupt and default? How do you think that will impact on people's opinions of us--Europe's other small, crisis-hit country? Do you think it will inspire confidence in us?

Bailing out Greece is what is called in economics, a dead weight loss. Everyone loses.

Let the market sort the sh1te out.

[LDF]

No statement from Lenihan or Cowen yet on our €450m digout to the bankrupt Greeks. No sign of Lenihan or Cowen yesterday when the EC pointed out to the lads that throwing €4bn into the Anglo hole could not be described as an "investment".

It seems Lenihan will only present himself to the media when he can spin good news.

[LeDroit]

[QUOTE=orbit;2620772]I understand the principles. What I'm wondering about is the existence or size of the markets you're talking about. Who is (or was before this crisis) interested in buying options on Greek bonds? How liquid is the market for derivatives on Greek bonds? Any figures? Or are we talking about Paddy Power type betting exchanges here?QUOTE]

The bond yields are sky-rocketing day by day. That is not a considered economic opinion based on fresher daily information. That is the invisible hand of speculators. Nothing considered changes that quickly, it has nothing to do with the known state of the market. Instead it is a deliberate manipulation of the market, pushing for a default so the 'shorters' can cash in. The acceleration in the bond spread is a function of just how many more speculators are jumping on the bandwagon now. The early guys will of course earn the most.

[grafter1]

[quote=LeDroit;2620805]

I understand the principles. What I'm wondering about is the existence or size of the markets you're talking about. Who is (or was before this crisis) interested in buying options on Greek bonds? How liquid is the market for derivatives on Greek bonds? Any figures? Or are we talking about Paddy Power type betting exchanges here?QUOTE]

The bond yields are sky-rocketing day by day. That is not a considered economic opinion based on fresher daily information. That is the invisible hand of speculators. Nothing considered changes that quickly, it has nothing to do with the known state of the market. Instead it is a deliberate manipulation of the market, pushing for a default so the 'shorters' can cash in. The acceleration in the bond spread is a function of just how many more speculators are jumping on the bandwagon now. The early guys will of course earn the most.

I'm sorry but you don't know what you're talking about. There are speculators of course but the reason for the Greek default lies solely with a nation who overpaid themselves and lied about the state of their finances to enter the EU.

[The_Big_Fellow]

The Germans are acting the maggot over this like they have clean hands here when they have anything but.

Themselves and the French were the biggest backers of the Euro-project, Germany benefited the most from the Euros introduction - its no coincidence that Germany finally shook off the stagnation blues when the Eurozone came into being. They have pursued a very merchantilist policy - similar to China - relying on others to buy products from them , but doing very little in return ,except for the purchase of raw materials and loaning more money to allow others keep buying their products and keeping their own employment rates up. I havent got the stats on hand - but Im sure if you look at inter-EU trade - you will find that Germany has been running large surpluses of trade with them all. Trade has to be a two-way street and in that Germany has refused point blank to further liberalise and de-complicate entry into the German market - if Germany's domestic spending even approached that of France, let alone us spendthrifts in Ireland and the UK - it would go a long way towards recallibrating the balance of trade in the EU. Germany is now going around like a drug dealer who has just found god and is acting holier than thou when it comes to the economic structural crisis which in a way is the world economic crisis in microcosm.

That said - the Greeks have only got themselves to blame for the ********************ty situation they find themselves in. I find it amazing that nobody is mentioning the outrageous degree of tax evasion that happens there as one of the primary causes of the reluctance of the financial markets to loan to them except at extortionate rates.

All Greeces woes are internal and unless they collectively undergo a lobotomy and come to the conclusion that paying your taxes is as important a patriot duty as protesting,rioting and striking - then I don't see how they are going to get out of a situation that has been coming down the tracks for over 30 years.

Unless you've actually lived and worked in the country - its very hard to explain to people that the Greeks have been living on the backs of Allied,US, Nato and EU financial aid since the 1930's.

I lived and worked in Greece from 1994 to 1998 and I can tell you some stories. For a start I was classed as "resident non alien" on my identity card -still have it lying around today - I was teaching English - but Greece dragged its feet big time on recognising other EU nations qualifications and on other EU citizens rights -mostly under pressure from Unions and vested interests - thus I was stripped of my rights as an EU citizen - which meant I wasn't allowed open my own school, work in the state sector or in anyway compete with the natives - legally speaking. I had go through 3 weeks of getting medical tests ,x-rays, hepatitis tests,AIDS tests, malaria,legionaires disease and whatever else they could put in my way cos I'd just got off a plane from Joseph Conrads Heart of Darkness! - I had to go to a different hospital for each - then back and forth between police stations and government departments - which only worked between the hours of 10am and 2 pm - monday to thursday - passed from Billy to Jack within each department collecting stamps from the laziest unpleasant feckers on planet earth. the things you do for love eh.......................

Thats just a taster - but it goes to the heart of the matter - Greeks feel absolutely no obligation to treat the state in any other way than as a cash cow to be milked and to provide steady employment when their other private enterprises (from which they will do their damndest to pay no tax from) are quiet - ie the wintertime. This is why most Greek public servants work 4 hours a day for the state and 6-10 hours for themselves and the state facilitates this by giving them convenient hours - this is why most state agencies finish dealing with the public at 2pm and then they are free to engage in their other jobs for the rest of the day. Teachers work from 8am to 1.30 pm and then they are free to give lessons in private schools or in their own homes at the much bigger price and payment is in cash of course. Thus this is why the state education system is a joke and that parents fork out thousands for little adonis's private tuition which can last from 2-3pm to 10 or 11pm at night - resulting in a crazy race for entry to the 3 universities in Greece (for a population of over 11 million) which are chronically underfunded -resulting in even more inequality as those who can afford it send their kids abroad to the UK and the USA for Third level. There was a government proposal during this time to extend the school day and properly fund it - the country went ape******************** - all the unions, the employers organisations everybody came out against it and it was shelved.

Everybody double jobs in Greece - most public servants have a little shop,hotel or resturant on the side. The dream in Greece is to have a secure state job,plenty of contacts, a private enterprise on the side and a Swiss bank account. professionals completely diddle their books routinely - maybe paying 10% of what they owe the taxman - and Greece is a chronically undertaxed country as it is. The biggest insult you can give to a Greek ,outside telling him his mother is an anatolian lesbian mule - is to ask for a receipt - this is widespread in every aspect of Greek society.

When I was there - I had a great life - worked for private school for 4 hours a day - the rest was my own - which i filled with private lessons where I could charge up to 30 euros an hour - cash - and other nixers for travel companies where I processed airline passengers at the Airport (cash), gave tours of Athens and the surrounds (cash) - worked part-time in an Irish Bar(cash) etc etc - I never lived better financially in my life - I never worried about getting caught - nobody did - even if I got in some bother - my prospective brother in law was the deputy super in the Piraeus police - I did get caught once in possession of a quantity of a slightly illegal substance that I had acquired from the Greek branch of Hizbollah who lived downstairs in my apartment block - I should have got the mandatory 5 years making the little marble copies of the Acropolis that tourists always buy, in the greek version of Alcatraz out in the Saronic gulf near Athens - but a couple of phone-calls and I was off the hook . Its a great life - but somebody at the end of the day has to pay the bill.

that is Greece's problem - I was listening to a report on the BBC world service and it is estimated that tax evasion cost the Greek exchequer between 25 and 40 Billion euros a year - a year! - jesus - you can kinda understand the Germans impatience with them now.


Thats what the international markets are worried about - if Greeks were even attempting to be honest with themselves - all the government red ink and "tax increases" are useless when nobody pays a blind bit of attention to them.

Greece has a problem with its unions, they seem to be bolshy for the sake of it. The above while known, is interesting to hear it fleshed out. Greece to default is a certainty.

[LeDroit]

[quote=grafter1;2620816]

I'm sorry but you don't know what you're talking about. There are speculators of course but the reason for the Greek default lies solely with a nation who overpaid themselves and lied about the state of their finances to enter the EU.

I agree of course that this cant happen with a country that is respected in the market with sound fundamentals. Greece's position is of course mostly down to living beyond its means but once vulnerable, once open to be manipulated by 'sentiment', then the speculators can exert a terrific influence. It is simply not realistic to assume that bond yields are moving in the huge leaps that they are day by day simply because there is something being discovered by the market day by day. That movement is caused by speculation as I have outlined.

[Gimpanzee]

I presume we are getting Anglo to write the cheque for the Greeks?

[Cassandra Syndrome]

[quote=grafter1;2620816]

I'm sorry but you don't know what you're talking about. There are speculators of course but the reason for the Greek default lies solely with a nation who overpaid themselves and lied about the state of their finances to enter the EU.

Yeah the secondary market has gone haywire. Their bond yield curve is completed inverted. The 2 year is at 12% and the 10 year back down to just over 8%.

Inflation has risen to 4% in Greece, so this has upset the bond vigilantes a bit. But its the whole catch 22 situation of Greece having to accept the IMF / EU on the one hand and the chaos that will ensue from the public once these austerity measures are imposed as a result. Greece in the short term is looking rather post apocalyptic, the yield curve is reflecting this.

[cozzy121]

..... Greece to default is a certainty.

We'll be soon after. Bertie's true legacy coming to pass...