Debt Rattle July 8 2015


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    G. G. Bain Asbury Park, Jersey Shore 1914 • Greece Files Formal Request For Eurozone Loan (Reuters) • Why Greece May Have Already Won (CNN) • [Chinese
    [See the full post at: Debt Rattle July 8 2015]

    V. Arnold

    I must say; the Greek conundrum has been a humbling experience for me; I have finally realized I have no idea what I’m talking about, concerning Greece, its leaders, and its entanglements with the EU.
    So, henceforth I shall shut up.

    John Day

    Weird, I can’t access Zero Hedge this morning…


    it’s down, John, being fixed


    Nigel Farage speaking to Tsipras:


    V. Arnold – I haven’t got a clue either, because I actually thought that what Karl Denninger had to say yesterday made sense. Naked Capitalism refused to even post part of his letter, so it must be wrong, right? God if I know. Here’s what Karl had to say today:

    “Meanwhile people seem to think that Greece still has some sort of “solution” coming with Tsipras “capitulating.” Uh, no. But this much is obviously true — Tsipras, if he intends to actually resolve the problem, has to issue something like what I wrote yesterday.

    But he hasn’t, and it appears he won’t, which means that Greece is hosed and so is the rest of the Euro zone.”


    Perhaps someone can point out the flaws in what Karl had to say yesterday in “Dear Frau Merkel, Herr Tusk and Herr Juncker”:

    “Let us begin with the basics. No government is accountable for the crimes of previous administrations. This is an international truism; Germany, for example, has never paid Greece for the economic and property damage done to our nation during WWII by Nazi Germany; that government was of course removed from office. While it would be nice to see those funds, which under inflation would exceed our gross indebtedness, we recognize that we cannot hold the current German government accountable for the sins of a previous German administration.

    Similarly, the Troika and remainder of the EU cannot hold the current Greek government accountable for the unlawful acts of the previous administration — an administration that, I remind you, was fired by the people of Greece. That said firing came peacefully through ballots rather than bullets is immaterial.

    The debt which you seek to collect was, in the main, unlawfully contracted. Many international banks conspired together with the previous administrations to unlawfully present a false view of the nation’s finances. Further unlawful and fraudulent acts occurred thereafter, including during the bailout a few years ago when Merkel herself, it has been revealed, knew she was negotiating a loan that could not be repaid under any reasonable commercial terms.

    Fraud vitiates all contracts and this is no exception. As such the debt you seek to collect is, under both Greek and International law, invalid, never mind that the present administration cannot be compelled to honor it even were it to have not been fraudulently contracted.

    We therefore present the following:

    While we are obligated to honor none of the outstanding debt as a gesture of good will we will honor one fourth of the approximately €330 billion owed on a renegotiated basis, or €82.5 billion. These old bonds shall be tendered to our Treasury in exchange for new Greek bonds with a 10 year maturity at 17 basis points over the current yield of German Bunds, or a 1% rate of interest. We shall pay said interest in the amount of €825 million euros due annually in fourths on a quarterly schedule, with the first payment to be made on September 30th and then quarterly thereafter, as is standard in the international community. We further reserve the right, but do not have the obligation, to prepay and extinguish up to 1/10th of this remaining indebtedness (€8.25 billion) at any time during each of the next 10 years.

    With the rest of the alleged debt certificates we will hold a ceremonial bonfire on the steps of Parliament tomorrow morning at 08:00.

    We understand that this will lead the Euro zone and others to decide not to lend us money in the future, quite possibly for a long time or perhaps forever. We are perfectly ok with this, as no government can borrow on a sustainable basis anyway and that is a large part of the fraud that you, and the previous administrations of Greece, conspired in. Such claims of “sustainability” are per-se frauds as they violate the laws of mathematics.

    We are not leaving either the EU or the Euro, however as we fully intend to take full advantage of the EU economic zone advantages, including visa-free travel between EU nations and tariff-free trade.”

    And he goes on to say how it can be accomplished. To me, it sounds like the only solution, but then I hit the side of my head and remember that we’re talking politics here.


    Interesting re Chinese speculators. I’ve seen the same thing with the Chinese on real estate, education, sport lessons…well, everything actually.

    “As John Mauldin wrote in his “Thoughts From the Frontline” e-letter this week: “Chinese individual investors are not primarily ‘value’ investors. Sky-high valuations don’t seem to faze them. They are primarily momentum investors who buy whatever is moving and sell whatever is falling.

    “According to my friends who go to casinos and watch the Chinese gamble, they tend to jump on a ‘trend’ such as red coming up on the roulette table repeatedly — never mind that the odds are only ever 50-50. Red is seen as hot and therefore the way to bet. That carries over into trading styles. …”

    When highly unsophisticated investors run into trouble, they panic quickly and try to get out at any price. The same inexperienced bettors who drove Shanghai up to 5,000 will take it way down, maybe to the last bear-market low above 1,700 — or maybe even lower, to 1,500, before it finds a long-term bottom.

    When Shanghai was peaking at 5,000 in June, I gave you five words of advice: Get. The. Hell. Out. Now.

    To which I’ll add five more: And. Stay. The. Hell. Out.”

    China’s Stock Market Crash Is Just Beginning


    “China has 89 million investors with brokerage accounts for a population of 1.3 billion, according to the China Securities Depository and Clearing Corp., implying about 7% of the people are set up to trade stocks. Just 55% of the accounts held stocks on June 12.”

    Some other writer (though I can’t find the article) called bullsh*t on people saying that the stock market crash was going to hurt the peasants. He said nothing could be further from the truth, as it is only the wealthy who are in the stock market.

    If there is a winner for every loser, who won? Did companies/real estate corporations/local governments (who were seriously in debt and wanted to get out of debt by cashing in their stocks while the going was good) suck in unsophisticated wealthy investors, then jump out with all the winnings? Who won?

    John Day

    At least 1,331 companies have halted trading on China’s mainland exchanges, freezing $2.6 trillion of shares, or about 40 percent of the country’s market value, Bloomberg reported on Wednesday.

    The Shanghai Composite Index fell 5.9 percent on Wednesday. It’s now about 32 percent below the peak of 5,166 it reached on June 12. The unwinding of margin loans is adding fuel to the fire. Individual investors in China, as we all know by now, have used generous margin financing terms to enter the stock market and then build up their portfolios. Less-known is that Chinese companies have been doing the same thing by using their own corporate stock to secure loans from banks.

    This means that they stand to lose a lot when those share prices start trending dramatically lower.Says Nick Lawson at Deutsche Bank: “Stocks are being suspended by the companies themselves because many have bank loans backed by shares which the banks themselves may want to liquidate, joining the queues of margin sellers.”
    Nomura analysts added that: “Some bank loans have been extended with shares of listed companies put up as collateral.”

    Numbers here are sketchy, but the team at Nomura estimated that the total amount of such loans may be 500 billion yuan to 600 billion yuan ($80 billion to $96 billion). This sounds like a lot but is equivalent to about 1 percent of total loans to Chinese enterprises.”


    The following appeared on bill Mitchell’s website yesterday.
    Last Wednesday (July 1, 2015), the ABC radio presenter, Phillip Adams, in a wide ranging interview about the upcoming referendum in Greece and the prospects for the nation, asked the then Greek Finance Minister: “My jokes about printing drachmas in the cellars, remain jokes?” The then Finance Minister replied: “Of course they do … we don’t have a capacity … because … Maybe you don’t know that. But when Greece entered the euro in the year 2000 … one of the things we had to do was to get rid of all our printing presses … in order to impress on the world that this is not a temporary phenomenon … that we mean this to be forever … we smashed the printing presses, so we have no printing presses”. The interchange occurred at the 49:46 minute mark in the – following program. In my research for my Eurozone book, which was published in May this year, I studied in some detail how the euro was introduced, how it is disseminated, how the notes are printed and the coins minted and how nations in other contexts had introduced their own currencies. When I heard that interview I wondered why the then Greek Finance Minister would want to mislead the Australian listeners, even though interviews like this are no longer geographically restricted and that he was clearly intent on convincing the world, a few days before the referendum, that Syriza was committed to the euro and exit was not an option. Earlier in the week, I had railed against the lies and misinformation coming out of the EU leadership. The boot was on the other foot in this case. But it also raises questions of how an exit might occur in the event that Syriza actually stand up for its electoral mandate (anti-austerity) and refuse to agree to any further austerity. I doubt they will do that but hope springs eternal.

    This map locates the Bank of Greece, Banknote Printing Works (IETA) at 341 Messogeion Avenue, 15231 Halandri (Athens).


    The Bank of Greece has an information page where it describes the location, functions and capacities of – The National Mint – aka The Banknote Printing Works of the Bank of Greece.

    We learn about its history (constructed in 1941) and by 1947, it was production the “1,000 drachma banknote (Series IV) and of cheques and other securities for the Bank and the Greek government”.

    In 1971, the Bank of Greece became the legal tender producer in Greece (after the function was previously the responsibility of the Ministry of Finance).

    The Bank of Greece tells us that far from smashing the printing presses, the “National Mint was organised in line with Western European standards and was equipped with state-of-the-art machinery for the manufacturing of coin dies and the striking of legal tender coins, commemorative and collectors’ coins, medals, etc.”

    It retains those capacities to this day.

    The European Central Bank tells us – The production and issue of banknotes in the EU member states – that “Thirteen EU Member States have their own banknote printing works”, with “eight countries” including Greece, locating this facility within the central bank.

    When Greece entered the Eurozone, the National Mint’s functions changed marginally. It now produces euro banknotes and euro coins, among other things.

    The Bank of Greece say that:

    The tasks of the Banknote Printing Works Department are:

    – To print the Euro banknotes after ECB’s approval.

    – To strike Eurocoins on behalf of the Greek State and third parties, as well as commemorative coin series and medals.

    – Το perform printing works on behalf of the Bank, the Greek State or third parties which mainly concern security documents, such as Securities, Bonds, Treasury Bills Surety Bonds,Lottery Tickets, Passports, Identification Cards, Residence Permissions etc.

    IETA has “highly qualified and experienced personnel”, “state of the art equipment” and access to “materials of top quality and features that guarantee the high quality of final products”.

    So despite what Australians were told on our national radio the other evening, it certainly looks like the ‘printing presses’ are fully functional and were not “smashed” in “the year 2000″ or, for that matter, in 2002 when Greece, in fact, entered the Eurozone.

    John Day

    It may be that “smashed our printing presses” is shorthand for “completely relinquished any ability to print a sovereign currency” (and smashed the dies).
    The nation of Greece cannot decide to print Greek-brand Euros. I believe the ECB controls the bank of Greece and the presses.


    China is an interesting foreign playground. Its crazy to think we understand the rules and how they can be applied. So today I find out why the Chinese market cannot move drastically in a sell off.

    So if you own stock in China and trade on their exchange watch out for this one. New law if you own more than 5% of any company you are in lock down for the next 5 months. You may buy more but cannot sell – them the rules. Goodbye freedom and hello stability – yeah free people won’t do something with that.

    I want to see what happens to Mr. Buffet on this one. Can enough money influence the Chinese perspective or has a non elected rule got enough force to contain even the powerful interest from the West?

    Lets watch to see how these rules play out.


    partica, john

    I see nothing there that would indicate Greece still has the printing presses the drachmas were printed on.

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