Greece BANKRUPT! Financial and Economic Collapse to Follow IMF Debt Default
Stock-Markets / Eurozone Debt Crisis Jun 29, 2015 - 11:51 AM GMTBy: Nadeem_Walayat
Syriza government betrays Europe and the Greek people says angry EU President Juncker, by Syriza lying to its people on the truth of Greece's proposed bailout conditions and that he has no trust left in Tsipras. Juncker in blunt language made it clear that a NO vote on the 5th July referendum (that I don't think will actually be held) would mean that Greece will be kicked out of the euro-zone.
“’No’ would mean, regardless of the final question, that Greece is saying no to Europe,”
Greece's 5 year euro-zone soap opera is finally coming to the end of its final season as Syriza's "Game Theory" expert leaders have clearly completely miscalculated their moves in their efforts to to keep kicking the Greek debt can down the road for another year whilst Greece continues to suck the financial blood of the Euro-zone dry, which when the final totals are tallied will end up costing the Euro-zone tax payers well over Euro 350 billion. This includes ECB funding of Greek bank deposit withdrawals to date that total approx Euro 120 billion and up until Saturday amounted to several billions euros per day that today has come to an end and therefore the Syriza government announced that Greek banks would 'temporarily' close for a few days that will likely extend into weeks and then months.
Panicking Greek bank customers are today finding that most of the cash points have already run out of euros, this despite limiting withdrawals to just Euro 60 per day as Greeks banking system effectively collapsed today that was in reality a zombie banking system for 5 years reliant on daily ECB financing. To illustrate the magnitude of the crisis, imagine a Greek person buying a house today and finding that all they can transfer / transact is Euro 60 per day! That money is LOST! GONE ! Stolen by the Greek government who will only release it in devalued drachma's when its worth less than 1/10th the Euro rate. And what tends to soon follow a banking system collapse is an economic collapse that we will likely see play out over the coming days, weeks and months that will make the depression of the past 5 years look like a picnic.
Greece is Bankrupt - Market Reaction
Finally its official Greece is bankrupt! Greece is set to default tomorrow on an IMF loan repayment of Euro 1.6 billion that actually would not have been a 'real' loan repayment as Greece was at the same time trying to pries Euro 7.2 billion out of the Troika to both finance debt repayments AND PUBLIC Spending, which despite already having enjoyed a 50% debt write down has once more seen its debt mountain mushroom to over Euro 240 billion with an additional Euro 120 billion thrown into Greek banks by the ECB.
The financial markets have reacted by marking down Greece 10 year bonds to HALF face value i.e. a certainty of default with bond holders currently facing a 50% loss that increases on a DAILY basis as bond holders continue to try to dump the illiquid bonds all the way towards a 100% loss, desperately attempting to recover a few percent from a total loss..
The athens stocks market is of course CLOSED, so there is no market reaction to show but if open would probably have experienced an opening crash of at least 15% i.e. the ATG index would probably have plunged towards 650 before bouncing.
Whilst the UK's FTSE as of writing is down about 1.6% at 6637 as it bounces off a new low, attempting to make a base where it is likely the bounce higher will continue into Wall Streets opening as the FTSE awaits Wall Streets response that will probably no be as bad as expected and so the FTSE could continue climbing higher into today's close.
Where the currency markets are concerned my next in-depth analysis and accompanying detailed trend forecast will pull ALL of the disparate strands together to conclude in the prospects for the US Dollar trend for the remainder of this year, so ensure you are subscribed to my always free newsletter to get this in your email in box.
In the meantime see my US Dollar trend forecast for 2015 and accompanying video -
14 Dec 2014 - U.S. Dollar Collapse? USD Index Trend Forecast 2015
Unintended Consequences of GrExit
Whilst the mainstream press focus is on the financial and economic consequences what seems to be missed is the ISIS consequences of an GrExit as Greece's northern borders would become open to hundreds of thousands of migrants, including several hundred ISIS terrorists to wreck havoc right across Europe, let alone the consequences of Russia and China seeking to use Greece to their geopolitical advantage.
More key points on the Greece crisis in my recent articles -
28 Jun 2015 - Greece Banking System Collapse Monday as ECB Pulls the Plug, Capital Controls Ahead of GrExit
GrExit Beckons
The mainstream press has once more been caught off guard as regurgitated euro-zone propaganda had resulted in the consensus view that a last minute deal would be done that would prevent Greece from leaving the euro-zone, which was the primary strategy of the Syriza government to black mail the euro-zone with the threat of a GrExit in exchange for a permanent subsidy from Euro-zone tax payers coupled with 50% debt write offs every few years.
However, it is finally starting to dawn on the 'herd journalists' that a GrExit in the wake of the ECB announcement is actually the most probable outcome and so have finally begun writing streams and streams of mostly nonsense on the ramifications of a GrExit.
My consistent view for sometime has been that a GrExit was a near certainty (see excerpts below) for the fundamental fact that Greece within the Euro-zone CANNOT PRINT MONEY AND DEBT AND INFLATE TO PAY FOR its bloated public sector and voter bribes. Greece for the duration of the 'crisis' has had NO CHOICE but to leave the Euro-zone and all that the ECB, and the IMF have done is to throw good money after bad that totals some Euro 320 billion of Euro-zone tax payers money flushed down the Greek toilet. It should be noted that this follows a decade long spending binge on the back of GERMAN LOW INTEREST RATES, when the Greek government wracked up debts that it HID from the markets, which it could do because the debts were denominated in EUROS. The lied, they stole and then they wanted a perpetual euro-zone subsidy just like Scotland enjoys in the UK.
What's going to happen Monday?
Well, without ECB financing of every single euro withdrawn then the Greek banks do not have the euros in their vaults to pay out to withdrawing customers that were already in a building panic of withdrawing 2-3 billion euros per day. This means that many if not most Greek banks will not open Monday, as it is probable that the Greek government will before Monday's open announce a Bank Holiday that could run from days to weeks to months, that will likely be coupled with the announcement for capital controls as the Greek government effectively attempts to steal the remaining Euro 100 billion or so of Greek customer bank deposits just as Cyprus did last year.
Unfortunately for Greek depositors ITS ALREADY TOO LATE, their money is now gone! As temporary capital controls translate into permanently frozen bank deposits only to be released once their purchasing power has been eroded away to nothing i.e. by means of Greece printing its own currency as I have often written of over the years as what would eventually take place in Greece.
26 Jan 2015 - Greece Votes for Syriza Hyperinflation - Threatening Euro-zone Collapse or Perpetual Free Lunch
Grexit - Greece Euro-zone Exit
A Syriza majority government will embolden the radical left to embark on a suicide mission to demand freshly printed ECB Euros to finance an ever expanding socialist spending binge where the price expected to be paid will be by the rest of the euro-zone in terms of printing money to finance unproductive activities such as the public sector and the life styles of corrupt politicians. This puts Greece ultimately on the track towards being ejected out of the Eurozone with the consequences of there being high inflation (at least 30%) if not an hyperinflationary panic event for Greece and its new currency.
New Greek Currency
The Greek central bank will likely have already made contingency plans to launch a new currency in the wake of an GrExit details of which now could be made public within a matter of days in an attempt to reduce the instability that Greece now faces.
The bottom line is that this is mostly Tsipras and Varoufakis doing, the so called 'Game Theory' experts who attempted to black mail Europe just got their bluff called. So do not buy into the propaganda that will spew from their mouths over the coming hours, days and weeks attempting to lay the blame elsewhere when the truth is that Greece has stolen Euro 320 billion from the euro-zone.
25 Jun 2015 - European Empire Strikes Back Against Greek Debt Fantasy, Counting Down to GREXIT
The bottom line is that Greeks whole heartedly believe in their fantasy economy, one that promises affluence without work, retirement without work, public services without paying for them, life after death, no wait that is a different fantasy. However, Greece is a MIRROR for ALL euro-zone members, for the Greeks are human, and therefore ALL of the other euro-zone members are also delusional INCLUDING GERMANY because the Euro-zone is built on a delusional construct of a single currency. Well all currencies are pure fantasy where someone believes in the currency because they have been repeatedly told that it has value which I will cover in detail in my next in-depth analysis so ensure you are subscribed to my always free newsletters.
My long standing view is that the best thing for the Greek people to do would be to leave the euro-zone. As of writing Greece apparently is counting down to yet another deadline today (Thursday) which will pass just as surely had Wednesdays 11am deadline passed without event and so will probably Fridays deadline as Greece remains firmly on the path towards a GREXIT. Some times I have to wonder is the Greece debt crisis real or is it a never ending soap opera that ends each days episode with a cliff hanger. JUST GET ON WITH IT AND EJECT GREECE, then Spain, Portugal and Italy out of the Eurozone!
And as GREXIT appears probable then expect much huffing and puffing from Alexis Tsipras laying the blame at the feet of the Euro-zone rather than looking in the mirror at the power hungry mad marxist staring back, who delusionally sees it as the right of Greece that like a vampire sucks the blood of the euro-zone forever.
19 Jun 2015 - Big Fat Greek Bank Run - Greece Banking System Could Collapse Monday 22nd June
Greece Bank Run Going Exponential
The Greek banking system has been bleeding deposits all year, having seen at least Euro 40 billion withdrawn this year, leaving behind approx Euro 120 billion. However, as the end game approaches (Varoufakis is apparently an expert on Game Theory) the rate of withdrawal has accelerated to over Euro 1 billion per day, up from approx Euro 200 million a day of a week ago, and could keep doubling every other day, which is despite ECB support on a DAILY basis without which Greece's banking system would have collapsed 5 years ago! Which means Greek banks are paying withdrawing depositors with funds from the ECB that to date totals approx Euro 120 billion because the Greek banks have been bankrupt for some time!
Even Greece's central bank panicked by opening warning the Syriza government that Greece was heading for a catastrophic crash out of the euro-zone.
18 Jun 2015 - GREXIT - Greece Wants to Become Scotland, Seeks Permanent Subsidy from Euro Tax Payers
The Big Problem is PorExit, SpaExit and ItaExit.
Greece in economic terms is a flea on the back of the Euro-zone elephant that could easily survive a GREXIT. But the real problem is who would be next, for soon the pressure would mount on the other PIIGS, with Portugal, Spain and Italy vying for who would be next to EXIT the euro-zone, something which the Euro-zone would not survive. Therefore that remains Greece's 'Ace in the hole', which is why they are still in the eurozone, so probably suggests that some sort of fudge will be arrived at that would only DELAY GREXIT for the fundamental reason Greece is BANKRUPT!
A GrExit would also make a BrExit more probable, whilst Putin would be dancing in the Kremlin.
Source and Comments: http://www.marketoracle.co.uk/Article51250.html
By Nadeem Walayat
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Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.
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