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Old 6th Mar 2012, 13:53   #961 (permalink)
KAG
 
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Greece’s secret loan from Goldman Sachs Group Inc. (GS) was a costly mistake from the start.

On the day the 2001 deal was struck, the government owed the bank about 600 million euros ($793 million) more than the 2.8 billion euros it borrowed, said Spyros Papanicolaou, who took over the country’s debt-management agency in 2005. By then, the price of the transaction, a derivative that disguised the loan and that Goldman Sachs persuaded Greece not to test with competitors, had almost doubled to 5.1 billion euros, he said.




Papanicolaou and his predecessor, Christoforos Sardelis, revealing details for the first time of a contract that helped Greece mask its growing sovereign debt to meet European Union requirements, said the country didn’t understand what it was buying and was ill-equipped to judge the risks or costs.

“The Goldman Sachs deal is a very sexy story between two sinners,” Sardelis, who oversaw the swap as head of Greece’s Public Debt Management Agency from 1999 through 2004, said in an interview.

Goldman Sachs’s instant gain on the transaction illustrates the dangers to clients who engage in complex, tailored trades that lack comparable market prices and whose fees aren’t disclosed. Harvard University, Alabama’s Jefferson County and the German city of Pforzheim all have found themselves on the losing end of the one-of-a-kind private deals typically pitched to them by securities firms as means to improve their finances.




‘Squeeze Taxpayers’
The 5.1 billion-euro mark-to-market value of the swap was “locked in,” Papanicolaou said. It was that politically motivated decision to restructure and fix the increased market value that did as much damage as the original swap, said Sardelis, now a board member of Ethniki General Insurance Co., a subsidiary of National Bank of Greece.

“You can’t have prudent debt management if you change all the assumptions all the time,” he said.

Gustavo Piga, a professor of economics at University of Rome Tor Vergata and author of “Derivatives and Public Debt Management,” sees a different lesson.

“In secret deals, intermediaries have the upper hand and use it to squeeze taxpayers,” Piga said in an interview. “The bargaining power is in investment banks’ hands.”


The full story there, very interesting: Goldman
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Old 6th Mar 2012, 14:11   #962 (permalink)
 
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KAG,

Good link and info. Thanks for posting/sharing.

Quote:
Goldman Sachs’s instant gain on the transaction illustrates the dangers to clients who engage in complex, tailored trades that lack comparable market prices and whose fees aren’t disclosed.
And the 'Clients' are dumbs**t politicians that would know a derivative from hooker and are blinded by their own spin and the fact the taxpayer will be picking up the bill, not them.

Quote:
“In secret deals, intermediaries have the upper hand and use it to squeeze taxpayers,” Piga said in an interview. “The bargaining power is in investment banks’ hands.”
And they like to claim 'democracy' ? and who put the bargaining power in investment banks hands ? the same dumbs**t politicians that don't know their arse from their elbow. but still what do do they give a rats for ? they get a gold plated pension, make millions consulting and lecturing on their 'brilliance' while the tax payer repeatedly takes it up the a** for decades more.

grand socialist schemes, great aren't they ?
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Old 6th Mar 2012, 15:59   #963 (permalink)
 
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The fact of the matter is that Goldman Sachs didn't force the Greeks to take the deal, they did it VOLUNTARILY, they brought it upon themselves and we shouldn't be the ones paying to pull them out of that mess.

And it also shows the Greek economy was a mess then, which throws KAG's earlier posts about how it was the US banking crash in 2008 which caused all the problems the Eurozone is facing now completely out the window and backs up the posts by myself and others that certain economies were in the mire long before 2008.


Build a house of cards and there's only one result.
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Old 6th Mar 2012, 18:10   #964 (permalink)
 
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Quote:
The fact of the matter is that Goldman Sachs didn't force the Greeks to take the deal, they did it VOLUNTARILY, they brought it upon themselves and we shouldn't be the ones paying to pull them out of that mess.

And it also shows the Greek economy was a mess then, which throws KAG's earlier posts about how it was the US banking crash in 2008 which caused all the problems the Eurozone is facing now completely out the window and backs up the posts by myself and others that certain economies were in the mire long before 2008.
Further to that HB, it goes to show the rank corruption / negligence / ineptitude of the EU Bureaucrats as Greece's financial situation initially meant to EU, then a few months later suddenly, hey presto it does.

In the most simple basic business review of annual financials would instant flag up a huge influx of funds a question for further investigation, but no, this large influx of funds was not under any scrutiny.

As i said months ago, that is either gross negligence or gross incompetence. But what did they care, it wasnt their lives they were commiting to the bread line.
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Old 6th Mar 2012, 18:31   #965 (permalink)
 
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Ah yes, but that was back in the good ol' days when everyone thought they would transform themselves into Germany but with better weather (except Ireland of course).

I wonder if/when the Eurozone would have faced this denouement if the US sub-prime market hadn't imploded?
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Old 6th Mar 2012, 18:37   #966 (permalink)
 
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I wonder if/when the Eurozone would have faced this denouement if the US sub-prime market hadn't imploded?
yep. The US sub prime market was precursor to, but without doubt the EUro crisis would have occurred anyway.
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Old 7th Mar 2012, 00:43   #967 (permalink)
 
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Interesting article here:

The Hundred-Billion-Euro Bomb: Euro-Zone Central Bank System Massively Imbalanced - SPIEGEL ONLINE - News - International

Quote:
More than a year ago, German economist Hans-Werner Sinn discovered a gigantic risk on the balance sheets of Germany's central bank. Were the euro zone to collapse, Bundesbank losses could be half a trillion euros -- more than one-and-a-half times the size of the country's annual budget
BandAide:

Quote:
The US 2008 sub-prime meltdown and the Greeks coming up on their can at the end of the road are symptoms of the same disease.

Insolvent, irresponsible government fiscal policy inevitably engenders rot, corruption, manipulation, fraud and theft on a macro scale which cannot be sustained as we continue to painfully learn. The current monetary policy attempt to hang on a bit longer, creating false wealth from nothing, is now, too, beginning to run out of steam.
It goes back to the collapse of Chimerica.

Good analysis here:

What
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Old 9th Mar 2012, 22:01   #968 (permalink)
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Moody have declared Greece to be in default . . .
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Old 10th Mar 2012, 05:03   #969 (permalink)
 
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The more important one is the ISDA declaring Greece to be in default (which, in reality, they are) leading to banks having to now pay out an estimated €3.5 Billion in "insurance" to those who have just had a massive haircut on their investment.

That's money banks will have to now find, with rumours that KA Finanz, alone, will need to find €1 Billion only 2 weeks after bailing out another Austrian bank, and that will put more stresses on them.


And we all know who will pay for that, we all know who will be paying for this fiasco that has been going on for 2 years, and we'll be paying for it for years.
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Old 10th Mar 2012, 12:25   #970 (permalink)
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Bandaide:
Quote:
Yet the common wisdom is only now seeing the default of Greece as likely, a circumstance a lot of us saw as near inevitable so long ago. You should accord us some acknowledgement of our prescience, KAG.
This thread said that greece would have to get out of eurozone, that eurozone in 2012 won't have as much many members as 2011, that eurozone will explode...
Prescience? If we have to acknowledge any prescience here, that would be mine as reality is extremely closer to what I was expecting than many of you.
And don't push me much about that or I would have to come back to you with some quotes taken from this very thread. Please spare me the waste of time.
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Old 10th Mar 2012, 12:31   #971 (permalink)
 
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Quote:
This thread said that greece would have to get out of eurozone, that eurozone in 2012 won't have as much many members as 2011, that eurozone will explode...
Some posters expressed such sentiments, and a majority seem to have been in agreement. KAG and a couple of others have taken a contrary stance and seem to think that each day that passes with EU/EURO still stumbling along on life support vindicates their views.

We are watching a train crash in slow motion.
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Old 10th Mar 2012, 13:51   #972 (permalink)
 
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Quote:
This thread said that greece would have to get out of eurozone, that eurozone in 2012 won't have as much many members as 2011, that eurozone will explode...
Prescience? If we have to acknowledge any prescience here, that would be mine as reality is extremely closer to what I was expecting than many of you.
And don't push me much about that or I would have to come back to you with some quotes taken from this very thread. Please spare me the waste of time.
Is it 2013 yet? No? That means 2012 isn't over and a hell of a lot can happen as there's still over 8 months to go.

So, do us all a favour and don't waste OUR time with your rhetoric of how everything is rosy in the Eurozone (along with your other borreaux about how the EU has kept the peace in Europe since the end of WWII, etc) and wait and see what will happen as Greece's economy goes further south with no growth, dwindling tax returns, no chance of raising loans to survive, etc, and the possibility of other countries like Spain and Portugal also going down since the EU has stated there will be no more bailouts in the manner of the Greek one.

So when Greece comes back asking for more, or when all the promises are thrown away by the new government in April, or when Portugal needs a bailout, we'll see what the reaction is...........
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Old 10th Mar 2012, 20:50   #973 (permalink)
 
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Quote:
By all means, hold me accountable for anything and everything I have ever posted on PPRuNe and I will try to justify, explain, rationalize, and contextualize everything I have ever said. I like to think of myself, Quixotically perhaps, as a man of honor who, when called to account, will answer. So fire away.

+1

Quote:
All of our current predicament cannot be laid simplistically at the feet of the US meltdown, or the Greek default, or any other singular event or policy. It can, however, be simplistically be blamed on soveriegn irresponsibility as many governments chronically laid debt upon debt to pay for their popular public giveaways and social policy costs.

Now the endgame is coming into view, and the lame excuses and blamethrowing from the left or from those used to blaming Americans for any of the world's shortcomings are seen for what they are
*THAT* is irrefutable.
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Old 10th Mar 2012, 22:58   #974 (permalink)
 
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We have printed today in our local newspaper

Councils borrowing billions.

It then goes on to tell us that every man, woman, and child in New Zealand now owes $1606.00 to local council rates.

In the past decade the debt has gone from $1.8bn to $7bn.

After a lot more local interest guff, we are informed by our Local Government Principal Adviser, Dr Michael Reid that

Quote:
Debt is an internationally accepted way of spreading costs over future generations and ensuring the present generation doesn't pay more that its share
We are also informed that some local councils are paying up to a third of the rates collected in interest on money borrowed.


Would I be the only one that strongly disagrees with our Principal Adviser, and such policies will lead us down the path taken by the EEC.???

Last edited by prospector; 10th Mar 2012 at 23:22.
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Old 11th Mar 2012, 15:35   #975 (permalink)
 
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[quote] prospector
We have printed today in our local newspaper

Councils borrowing billions.

It then goes on to tell us that every man, woman, and child in New Zealand now owes $1606.00 to local council rates.

In the past decade the debt has gone from $1.8bn to $7bn.

After a lot more local interest guff, we are informed by our Local Government Principal Adviser, Dr Michael Reid that

Quote:
Debt is an internationally accepted way of spreading costs over future generations and ensuring the present generation doesn't pay more that its share
We are also informed that some local councils are paying up to a third of the rates collected in interest on money borrowed.


Would I be the only one that strongly disagrees with our Principal Adviser, and such policies will lead us down the path taken by the EEC.??? [quote]

Confirmation of what a very sage friend there told me last year.

Practical Advice for the End of the Euro

An Antipodean Portugal ? Knowing the Kiwis, one wonders what they haven't disclosed............
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Old 14th Mar 2012, 20:52   #976 (permalink)
 
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Rumours that the UK has just been downgraded by an as yet un-named ratings agency...

The Beeb are going to break this story tonight. Thought I'd get in ahead of them.
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Old 15th Mar 2012, 11:40   #977 (permalink)
 
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Rumours that the UK has just been downgraded by an as yet un-named ratings agency...

The Beeb are going to break this story tonight. Thought I'd get in ahead of them.
Well, lets have some detail to your claim....................?????

Oh bother, wrong again. The correct story is that Fitch actually said..

......it regarded the Government’s fiscal plans as “credible”, but said that its decision to take a negative outlook reflected “the very limited fiscal space to absorb further adverse economic shocks.........." and there may be a "....greater than one in two chance on a downgrade for the UK over the next two years"

Last edited by pvmw; 15th Mar 2012 at 15:12.
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Old 15th Mar 2012, 13:39   #978 (permalink)
 
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Oops, my bad. I must remember to give my journo chum a kicking next time I see him down the pub. So much for his 'exclusive'.
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Old 15th Mar 2012, 15:02   #979 (permalink)
 
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Oops, my bad. I must remember to give my journo chum a kicking next time I see him down the pub. So much for his 'exclusive'.
Ah, and therein lies your problem. You actually believed something told you by a journalist.

Actually, its worse than that................. you have just admitted - on a public forum - that you have a chum who is a journalist!!
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Old 15th Mar 2012, 15:20   #980 (permalink)
 
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Psssst, pvmw, there is at least one regular contributor here who has, shall we say, a journalistic background.
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