Is the Greek Debt Problem Really Solved?

Posted at 10:53 AM (CST) by & filed under

My Dear Friends

If you were to talk to the intelligencia of the street you would be treated to the following. I do and I know.

1. The US economy is reaching escape velocity.
2. The equity market is now rising on #1 and liquidity is no longer the key ingredient.
3. The fact that gold did not go to $2000 on the Greek default means gold is tired.
4. The dollar is strong on all of the above.

The fact is there is not one ounce of truth in the above.

1. No account is taken for the savings of $40 billion not spent on utilities on the East coast for the winter that was not. Seasonality will soon factor into statistics, bringing them more toward a mean.
2. Without liquidity as a primary factor, the general equities market will go into severe reaction also due to weak internals that only stimulation can overcome.
3. The figures concerning the Greek debt and CDS activation are total fabrications invited by US management due to an election year tolerance for whatever might help.
4. The dollar this year will cave for reasons few understand. That is sundering of its use as an international settlement mechanism on a weekly basis.

Look for the long term cash buyers of gold to defeat the lower estimates of price that you will hear blasting out of the top callers, bears and seekers of your subscription money.

Pull the rock over your hole or go for a long walk. As always avoid margin like a disease.


Is the Greek Debt Problem Really Solved?
By Greg Hunter’s

Yesterday, a short but ominous press release was issued at the Commodities Futures Trading Commission.  It said, “At the request of CME Clearing Europe Limited (CMECEL), pursuant to Section 7 of the Commodity Exchange Act, the Commodity Futures Trading Commission issued an Order on March 13, 2012, vacating the registration of CMECEL as a derivatives clearing organization.”  (Click here for the CFTC press release.)  In plain English, the Chicago Mercantile Exchange (CME) no longer wants to be the clearing house for European derivatives.   The derivatives market in Europe must have been very lucrative for the company.  After all, just the credit default swap (CDS) market is reportedly worth $50 trillion globally.  (A CDS is a form of insurance.  If there is a default, the debt is paid by the entity that sold the insurance contract.)  I ask myself, why would the CME willingly stop being the clearing house for this profitable and large market?

Just last week, it was reported there was a new Greek debt deal where 95% of the bondholders voluntarily agreed to take nearly a 75% loss on Greek debt.  CNBC reported, “Greece successfully closed its bond swap offer to private creditors on Thursday, opening the way to securing the funding it needs to avert a messy default on its debt, according to several senior officials. . . . The biggest sovereign debt restructuring in history will see bond holders accept losses of some 74 percent on the value of their investments in a deal that will cut more than 100 billion euros from Greece’s crippling public debt.”  Buried in the CNBC story was this little tidbit that said, “That would potentially trigger payouts on the credit default swaps (CDS) that some investors held on the bonds, an event which would have unknown consequences for the market.”  (Click here for the complete CNBC story.)

Is the CME exiting the European CDS market just when the proverbial CDS contracts are about to hit the fan?  This comes just after the CME’s 50 year old CEO, Craig Donohue, announced his retirement earlier in the week. I am sure that is just a coincidence.  I know the mainstream media has been telling folks everything is just fine with the Greek debt crisis, but that’s not what a Member of the European Parliament said in an interview yesterday.  Nigel Farage said on King World News, “We sort of pretend that it didn’t happen and it wasn’t really a proper credit event, yet we know that various CDS’s are being triggered.  We also know that yesterday 110 private bondholders, who had held their bonds through German banks, are now taking legal action.  Just to top it all, the thing that almost made me laugh was that yesterday the German Finance Minister said, ‘We must be preparing now, any day, for a third bailout.’  So this idea that the leaders of Europe give that everything is fine, everything is not fine.”    The outspoken Farage went on to say. “You can argue that the ECB, by printing money, has staved off the crisis for a few weeks.  But the fundamentals haven’t changed one bit, the euro is in deep, deep crisis. . . . They are determined to prop up and keep together this completely failed experiment.  But they know as soon as they give in on Greece, the circus will move on to Portugal, Spain and possibly Italy.”  (Click here to read and hear the complete Farage interview on King World News.)