Soros bets against Euro

[Jan Klimkowski]

The elite attempts to play Magician Sleight of Hand with global financial markets have reached a new low, as documented by this excerpt from Zero Hedge:

Europe's Ponzi Takes A Twist For The Wacky: Greek Bank Equity To Be Used As Loan Collateral

(snip)

So let's see if we can make sense out of this:

Greek banks exist only due to the National Bank of Greece funding their operations by providing cash in exchange for Greek bonds as collateral; Greek bonds are trading at or around 50 cents on the dollar, which however results in nearly par cash; the NBG goes and pledges the same Treasuries to the ECB, in another collateralization operation. However, even that has failed to satisfy the full Greek bank system capital shortfall (remember that whole bank run and collapse in bank deposits?), and a €20 billion gap has opened up, which is where Bailout #2 is happening. The issue is that Greek banks can not offset selling interest and the SMP is forced to buy up eligible collateral which means there is a liquidity crisis. The only thing that could help this would be a greater deficit, which would be funded with more issuance, yet the IMF is forcing Greece to slash its budget deficit, thus substantially reducing future bond issuance, and repoability by local banks with the ECB, as final NBG-intermediated, counterparty. So instead the country's banks need direct foreign capital. However, this capital needs hard collateral pledged. Collateral which would have value in a worst case scenario, i.e., liquidation. Instead, what the EFSF has offered as "collateral" is the equity of the very same firms which will be immediately insolvent once this house of cards collapses, sending the bank equity collateral worthless, and buried under billions of debt liabilities, and in turn impairing the ECB which suddenly finds itself with hundreds of billions in worthless Greek paper, making additional funding for Finland, once it finds itself in a liquidity crisis, next to impossible.

That pretty much sums it up?

We have just one question: why will Finland agree to this again?

All joking aside, we are confident that this being the first bid in a compromise negotiation, Finland will likely end up with Greek bonds as collateral... which however are collateralized with even more worthless assets, and trade at 30-40 cents on the dollar, and as a result of this claim dilution, trade even lower, which in turn will force Finland to demand an 80% collateral haircut on Greek bonds, which kills the whole process as it makes a mockery of the ECB holding Greek debt at par. But fear not: Trichet said the ECB is not a bad bank and holds highly valuable assets.

Whoever said watching massive ponzi scheme unwind is not entertaining obviously had no idea what they are talking about.