The world’s newspapers are heralding the massive haircut taken by Greek sovereign debt holders as some kind of triumphal finesse in international finance. Specifically –
Just over 80% of Greece's private-sector creditors had agreed by a Thursday evening deadline to turn in their bonds for new ones with less than half the face value, touching off a massive debt swap that marks a seminal moment in Europe's long-frustrated efforts to rescue its most financially vulnerable nation.
The 9mar12 WSJ report goes on to celebrate this “seminal moment” of a long-awaited “rescue”.
But they got it all wrong. The private sector investors accepting this level of loss are saying nothing other than ‘My choices are to lose the whole thing, or get out with 47 cents on the dollar. I’ll take the 47 cents.’ Today Greece is having to pay over 600% for short term loans, which says that the probability of another default in 12 months is over 99%.
This has not been a solution to anything other than getting off of a sinking ship of state with some of your belongings. All these ‘rescue’ pyrotechnics do nothing but bamboozle European taxpayers (e.g. Germans) to not riot in the streets as their governments piss away more money down the toilet to buy time and rescue the private lenders (big banks and heavy hitters).
Meanwhile back at the ranch boys and girls – this is California’s immediate future, and then comes the main event … .