Posted on 04/30/2010 6:49:49 AM PDT by blam
Greece Armageddon, Financial Ebola Sweeps Through Global Bond Markets
Interest-Rates / Global Debt Crisis
Apr 30, 2010 - 08:37 AM
By: Mike Larson
What does the end of the bond market world look like? Something like this …
The chart above shows the yield on the benchmark 2-year note in Greece. Just a few short months ago, Greek sovereign yields were hovering around 2.1 percent. On Wednesday, they shot up as high as 18.9 percent!
Translation? The cost of borrowing for the Greek government — not some subprime mortgage customer or deadbeat credit card holder — shot up almost NINE-FOLD in the span of six months.
During this same time, the price of Greece’s 6 percent 10-year notes due July 19, 2019 plunged from 112.4 to 68.1. That’s a loss of more than 39 percent. Not on some dot-bomb stock … not even on a high-yield, or “junk” piece of paper …
… but on a sovereign government bond!
Folks, THAT is bond market Armageddon. And it’s playing out now. Right on the trading screen of every investor around the world.
Think Greece Is Alone?
Think Again!
Worse, the pain isn’t confined to Greece …
[snip]
(Excerpt) Read more at marketoracle.co.uk ...
Bailing out Greece could push countries like France and Germany into the same kind of problem. Bailing out Europe would do the same to us.
The debt/credit limit has just about been reached.
If you really really think that Greece is going to be bailed out and be just fine in 2 years, those bonds would be mighty tempting.
Bond vigilantes - doing the job that governments won’t do themselves.
But who will deliver the news that the party is over?
It going to happen to us because of uncontrolled spending by the feds. There is no way around this.
Correct. The debt market is saturated - from now on, more debt cannot generate wealth, but only more debt.
These countries do not get it and we are heading in that direction. When investors think you are LYING, as Greece did, about your defecit spending or other issues - they get concerned they are not going to get paid back.
They think your bonds;like Argentina, California, NY and other lib state bonds; are dog s*it and may default.
Greece is just like Demo union govt workers demanding higher taxes and more of Obama’s “stash.” Tarp was a union bailout.
Go for. Buy some Argentinian bonds to. The Argentinians are as corrupt and crooked as the Greeks and Obama - good luck.
Greece is one giant Ponzi scheme
http://network.nationalpost.com/NP/blogs/fullcomment/archive/2010/04/28/greece-is-one-giant-ponzi-scheme.aspx
When the checks stop coming and there is martial law in the streets due to rioting.
I think the message would be pretty clear.
When Dollar General becomes $10 General and vending machines are refitted to accept $20’s for a soda.
lol
every welfare state, including the US these days, is a giant ponzi scheme
Oh No.
I just had a horrible thought.
What if the Federal Reserve buys all those Greek bonds?
There won’t be any lights left working when this party is finally over.
global finance bump for later............
The Market Ticker
Karl Denninger
April 30, 2010
Amusing, really:
Union officials told Reuters on Thursday the International Monetary Fund had asked Athens to raise sales taxes, scrap bonuses amounting to two extra months of pay in the public sector, and accept a three-year pay freeze.
Other measures in the 24 billion euro package include raising the retirement age from an average of 53 to 67, the FT said in its Friday edition.
Yep.
Two problems:
1.Raising taxes means that private spending decreases. It must, because every dollar that comes from the taxpayer to fund government has to come out of private consumption or investment. It cannot be otherwise.
2.The Greek labor unions have made clear they will not accept the current austerity measures (read: cutbacks in pay and benefits), say much less more of them. We've already seen riots, which in point of fact are never that far away from a general conflagration, otherwise known as "civil war" (which is anything but civil.) There's a lesson in here in that the Greek deficit as a percentage of GDP is just over 10%.
So is ours.
So is Britain's.
So is Spain's.
The destruction they are witnessing "over there" will come here eventually. Remember, this disintegration came in just a few weeks - it was not long ago at all that we had a new Greek government which had made lots of pretty campaign promises and investors and banking officials worldwide - including the ECB itself, their central bank - said that the Greek situation was under control and they'd be able to work their way out of the hole.
These sorts of crisis situations never come slowly, just as did not Lehman Brothers. But just like Lehman, there was plenty of warning, if anyone had bothered to pay attention. Bear Stearns, threats of "Bazookas" in one's pocket and just the simple math made clear what was coming.
But as with most governments doing the difficult things - including locking up firms that enabled ridiculous levels of fraud in financial reporting and putting a stop to the games - never happens. The government is inevitably bought and paid for right up until the front wheels of the bus go off the cliff.
Then we all marvel at how "nobody could have seen it coming."
Well folks, it is coming. It is coming for Britain, with the amazing thing being that they're actually talking about it - and that after their upcoming elections very difficult measures will be taken.
But they're not being taken here.
They're not even being talked about here.
GDP is due out in 10 minutes, and I'm sure the number will be positive. But I'm also quite sure it won't be +11%, which is what it has to be in order for there to be real positive private final demand.
We're in a big hole and it's well over our head. If we keep digging the sides will eventually collapse on us. Neither I or anyone else knows exactly when it will occur, but that it will is a known, absolute and certain fact.
We need to stop digging, but I bet we won't - until the walls do in fact collapse.
The world is running out of suckers willing to lend money to profligate socialist governments. Eventually, false prosperity based on borrowing is self-correcting. I think Obama should simply declare that everyone in the world is now wealthy. We won the war on poverty, Mission Accomplished. Then he can go home.
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