In last week's report Why The Greece Episode Means More Inflationism, we conjectured that perhaps the US taxpayers could play a tacit role in the Eurozone's efforts to bailout Greece.
Then came recent news reports which revealed that Wall Street seem to have had lent a hand in the shielding of Greece's liabilities via the use of currency swaps since Greece joined the EU.
According to the New York Times, ``In 2001, just after Greece was admitted to Europe’s monetary union, Goldman helped the government quietly borrow billions, people familiar with the transaction said. That deal, hidden from public view because it was treated as a currency trade rather than a loan, helped Athens to meet Europe’s deficit rules while continuing to spend beyond its means."
David Kotok of Cumberland Advisors suspects that perhaps there is more than meets the eye, (bold highlights mine)
``It appears that Greece clandestinely attempted to use currency swaps as a deferral technique to project their payment obligations into the future and to hide them. Greek officials claim to the contrary; they say the transactions were reported. But an initial scan of the reports that were used in the early part of this decade does not find them. Hmmmm?
``Let’s make this clearer for readers: the use of this type of swap accomplishes the movement of debt off the balance sheet and into the currency balances. There can be legitimate economic reasons for this type of transaction as an offset to trade flows. And the same transaction can be used for outright deception if the user wants to hide a rising debt ratio.
``Now an investigation is underway by Europe’s statistical office, Eurostat. News reports have also been confirmed that Greece has a history of using this allegedly deceptive technique in the past. We now know it was done in 2001 and was contemporaneous with other actions that Greece was taking so it could become the twelfth member of the Eurozone.
``It also appears that these transactions were arranged through Goldman Sachs and that subsequently GS hedged its position to a neutral one by shorting or constructively shorting Greek debt. Did Goldman act improperly? That now also is a subject of debate. Investigations are certainly coming. Witch-hunting about Goldman Sachs and their book of derivatives is very popular these days. We expect to see more of it on both sides of the Atlantic Ocean.
``There will be much EU political outcry about this transaction which currently is measured at 1 billion euro. The key question for markets revolves around whether or not this is a single event or if there are more such transactions that will be revealed in the books of Greece or other EU member states."
Based on the above, there could be three reasons that would prompt for the US via the US Federal Reserve to intervene:
one, Wall Street has more exposure (perhaps indirectly) to the Greek (PIIGS) than is publicly known or declared and
two, there could be official efforts to cover the tracks of Wall Street's subterfuge.
three, to ensure the US dollar hegemony (by ensuring the survival of Wall Street who serve prime agents of the Federal Reserve and their alternate egos in Europe)
The ramifications of which appear to be headed in the direction of our much feared 'Mises Moment'.
Then came recent news reports which revealed that Wall Street seem to have had lent a hand in the shielding of Greece's liabilities via the use of currency swaps since Greece joined the EU.
According to the New York Times, ``In 2001, just after Greece was admitted to Europe’s monetary union, Goldman helped the government quietly borrow billions, people familiar with the transaction said. That deal, hidden from public view because it was treated as a currency trade rather than a loan, helped Athens to meet Europe’s deficit rules while continuing to spend beyond its means."
David Kotok of Cumberland Advisors suspects that perhaps there is more than meets the eye, (bold highlights mine)
``It appears that Greece clandestinely attempted to use currency swaps as a deferral technique to project their payment obligations into the future and to hide them. Greek officials claim to the contrary; they say the transactions were reported. But an initial scan of the reports that were used in the early part of this decade does not find them. Hmmmm?
``Let’s make this clearer for readers: the use of this type of swap accomplishes the movement of debt off the balance sheet and into the currency balances. There can be legitimate economic reasons for this type of transaction as an offset to trade flows. And the same transaction can be used for outright deception if the user wants to hide a rising debt ratio.
``Now an investigation is underway by Europe’s statistical office, Eurostat. News reports have also been confirmed that Greece has a history of using this allegedly deceptive technique in the past. We now know it was done in 2001 and was contemporaneous with other actions that Greece was taking so it could become the twelfth member of the Eurozone.
``It also appears that these transactions were arranged through Goldman Sachs and that subsequently GS hedged its position to a neutral one by shorting or constructively shorting Greek debt. Did Goldman act improperly? That now also is a subject of debate. Investigations are certainly coming. Witch-hunting about Goldman Sachs and their book of derivatives is very popular these days. We expect to see more of it on both sides of the Atlantic Ocean.
``There will be much EU political outcry about this transaction which currently is measured at 1 billion euro. The key question for markets revolves around whether or not this is a single event or if there are more such transactions that will be revealed in the books of Greece or other EU member states."
Based on the above, there could be three reasons that would prompt for the US via the US Federal Reserve to intervene:
one, Wall Street has more exposure (perhaps indirectly) to the Greek (PIIGS) than is publicly known or declared and
two, there could be official efforts to cover the tracks of Wall Street's subterfuge.
three, to ensure the US dollar hegemony (by ensuring the survival of Wall Street who serve prime agents of the Federal Reserve and their alternate egos in Europe)
Congressman Ron Paul raised the same concerns; (bold highlights mine)
``Is it possible that our Federal Reserve has had some hand in bailing out Greece? The fact is, we don’t know, and current laws exempt agreements between the Fed and foreign central banks from disclosure or audit.
``Greece is only the latest in a series of countries that have faced this type of crisis in recent memory. Not too long ago the same types of fears were mounting about Dubai, and before that, Iceland. Several other countries (Spain, Portugal, Ireland, Latvia) are approaching crisis levels with public debt as well. Many have strong ties to Goldman Sachs and the case could easily be made that default could have serious implications for big US banking cartels. Considering the ties between the Fed and these big banks, it is not outlandish to wonder if the US taxpayer is secretly bailing out the entire world, country by country, even as our real unemployment tops 20 percent...
The ramifications of which appear to be headed in the direction of our much feared 'Mises Moment'.
No comments:
Post a Comment