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Here it is folks:

The European finance chiefs also rebuffed any talk of debt relief, a step that the IMF has backed.

“Debt relief is impossible,” Schaeuble said.

Then a sustainable outcome is impossible.

Therefore, Greece must burn the entirety of the so-called Troika's bonds on the steps of the Parliament building tomorrow morning.

All of them.

There is no rational analysis that leads to decreasing debt over time without doing this.  A further bailout program under the ESM will immediately ratchet upward the debt:GDP ratio by another 25 percent, which puts the target further away rather than closer.

Such a program is thus an abject fraud and anyone who signs it on either side of the table deserves to be indicted, tried and hung.

PS: If you want to read their former finance minister's view, it's here.  While I suspect he and I have about as much politically in common as Marx and Madison, there are several kernels of truth in there that cannot be denied, with the most-important being the intentional transfer of bankster bad debt to the citizens, an utterly outrageous act that deserves to be answered with lifetime imprisonment or capital punishment for everyone involved in it.

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Today you're feeling pretty good, right?  Dow is up 200, S&Ps up 22, etc.

Yeah, it's all good; everything is up ~1-2% that was down ~1-2% yesterday.  It's all ok.

Well, no.

The IMF is not going to change the rules on its "loans" to Greece.  Any "deal" that does not actually burn up -- that is, extinguish -- about half to two-thirds of their outstanding debt is unsustainable and unworkable.

But a deal that does cut said debt means that the next demand will come from Spain, France or Italy and then it will snowball because the ECB fabricated itself what amounted to a levy on the entire EU membership to protect a handful of big banks that had bet on the Greek debt a few years ago, effectively taking almost all of it onto its balance sheet.

If that debt either is haircut or defaults then the ECB is insolvent as it, like all central banks, has almost no capital compared against the size of its balance sheet and it would be forced to issue a capital call to the member nations.

In short the governments of the EU nations would be called upon to "make good" the haircut amounts!  

Any guess at how many middle fingers will go up if that occurs?

This is why the situation is intractable -- and explosive.

I don't expect anything real to happen over the weekend, and as a result..... I do expect plenty of mortars set off on people's heads at said "summit".

This will be fun to watch but do so from a reasonable distance.

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(Were I to be appointed to lead the "negotiations" this is the communication I would send...)

Dear Troika Members;

I am in receipt of the Troika's demands as set forth in your presser today and am prepared to respond on behalf of the Greek Government and people.

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.

With regard to our banks I am instructing them to demand the return of their collateral from the ELA program at the ECB beginning tomorrow morning.  The ECB has applied a 45% haircut to said instruments, which we find outrageous -- provided said banks have not been lying about their asset values.  We intend to find out immediately whether this is the case, and the means to do so is to sell each instrument into the market as necessary in order to fund whatever withdrawals bank customers wish to process and pay the ECB for each returned instrument in good funds.  I will note that since most of the remaining €82.5 billion in our debt that we are honoring is in fact at the ECB (effectively all of it) should the ECB fail to return said instruments promptly as requested we reserve the right to set aside said Greek debt in exchange on a face-value par basis, tendering the replacement 1% instruments to the banks in question.  Since this collateral is deemed good under EU rules we are also thus authorized to issue however many Euros are denominated against them as required to fund said withdrawals.  I'm sure the ECB will not want us to do this since that would permanently transfer the credit risk of these instruments to the ECB and as a result I'm also certain that the ECB will promptly return said instruments to the banks.  Please be prepared to process their instructions beginning tomorrow morning.

I trust that our banks have not falsely declared their asset values but this is a matter for them to sort out through sales into the market in order to fund withdrawals by their customers, should they choose to so-withdraw their funds.  If our banks have fraudulently inflated their asset values that will become immediately apparent and the banks involved will go out of business.  The ECB has, for many years, had a regulatory responsibility to oversee the solvency of all banks in the ECB system and prohibit them from continued operation were they insolvent.  If the ECB and EU have shirked said duty we will expect the EU and ECB to fully fund any deposit insurance required up to €100,000 for each depositor should our banks be found to have lied.  We will, of course indict and prosecute any such banker as fraud is a serious matter and in addition we will extradite (at the completion of their sentence, if any) such persons should any state in the EU or the EU itself wish to pursue criminal fraud charges against them as well.  Should the ECB refuse to honor its obligations under the common EU deposit insurance system we again reserve the right to offset on a euro-for-euro basis every penny that is not promptly paid to said depositors.

Since we will not be availing ourselves of any further borrowing from the EU or ECB nor do we have any need for ELA assistance as our banks are allegedly possessing enough assets to back their deposits we reject any and all interference in the domestic budgetary and operational affairs of our sovereign nation.  This, however, does come with the caveat that since we will not be borrowing any money from your fine folks in either Brussels or Berlin we will obviously not be running a budget deficit on a grossed-up cash basis.

The necessary political debate as to the desired size of our government and the taxation to fund it is an internal Greek matter and none of your damn business, but I assure you that I have set that debate forward as the foremost duty of our Parliament at this time and expect it to be resolved within the next few weeks.  Any attempt to interfere in this process by EU, ECB, or any of its members states will be treated as attempted subversion of the Greek government by force or fraud, which I will remind you is a serious crime in any nation.

Should you find this proposal unsatisfactory we will burn all of the bonds that are allegedly due and, should the ECB refuse to return our banks' collateral we will exercise a right of offset against newly-issued treasuries on the above terms directly to said banks to be posted for the issuance of Euros here in this nation, as such a refusal would be theft by conversion and theft is unacceptable among free nations.   In addition we will be forced to issue criminal indictments against Herr Juncker, Herr Draghi, Fraud Merkel and a whole string of other individuals, including former government officials here, for theft by conversion and fraud against the Greek people.  Again, I'm certain that the ECB would not like to accept the credit risk in those tendered instruments nor does the EU and ECB wish to become embroiled in the difficulties that would ensue from the unpleasant but necessary action in issuing and prosecuting criminal indictments and as such I'm sure you will find this proposal to be satisfactory in all respects. 

Through this process we will be lifting the banking holiday and all capital controls upon your agreement or, if we are forced to exercise the "put" of those assets upon the ECB and take the above specified actions, at the close of business tomorrow.

Sincerely,

Alexis Tsipras

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The latest from the ECB suggests that they have raised the ELA "haircuts" on collateral tendered by Greek banks to 45%.

That's obscene -- unless the so-called "assets" are in fact worth nothing.

So let's take the two possibilities:

  • The assets are good.  The Greek banks should take them back from the ECB and sell them into the market to repay the ECB, keeping the rest of the funds from the sale.  With a 45% haircut currently being applied if the prices the banks are holding them at are not frauds then they can easily do this and pay the depositors who wish to withdraw funds while having plenty left over.  The amount of collateral (bonds) involved is relatively small compared against the totality of the EU debt marketplace; there would be zero (or nearly so) move in price caused by such a sale.  Doing this would shrink the size of the banks involved (perhaps to extinction), but so what?  No depositor would lose a nickel and there might be created new business opportunities for new bankers to spring up to fill consumer and business demand.

  • The assets are worthless, or at least worth far less than claimed -- and most-importantly, worth less than the haircut marks!  If this is the case then the Greek banks have been and are today committing fraud.  In this case every one of their executives and managers should be arrested, tried and publicly executed.  Yes, in this case the depositor money has been impaired and some will be lost but the people responsible will be properly punished for what they have done, deterring a future similar event.

So which is it?

Either the ECB has no bullets in this gun with their "haircut expansion" because the assets can be easily taken back and sold for more than the haircut value and this is what any rational business person would do or the assets are either worth far less than the haircut value or worse, entirely worthless.

AGAIN: Is this entire charade smoke and mirrors or is the Greek banking system a fraud-laced enterprise that needs to have virtually all of its participants face the harshest possible sanction?

One of these two must be true.

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Now that Greece has effectively spoken the real fun begins.

I'm wondering if there's a prosecutor with a set of gonads over in Greece that will issue indictments aimed at the ECB, particularly if they try to "now" apply a haircut to the ELA, or simply aim at Merkel due to what she apparently knew and believed at the time of the first bailout.

Never mind the myriad threats aimed at Greece's population by various officials, all intended to swing a vote that they have no right to interfere in.

You could start right here:

"I hope people say 'yes,'" European Parliament President Martin Schulz told German public radio. "If after the referendum, the majority is a 'no,' they will have to introduce another currency because the euro will no longer be available for a means of payment."

That's blatantly untrue; who's going to make the Euro "unavailable" as a means of payment?  You, Herr Schulz?  If so under what authority?  None, unless you intend to violate sovereignty further, perhaps with a few tanks!

Those who run this sort of crap ought to face sanction for their attempted interference, and a nice indictment or three would be right up the correct pipe in my view.

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