DON'T BLAME ME

I tried for hours but Google wouldn't let me do my thing. Then as I sat down to a perfectly cooked steak, local asperges and an excellent bottle of Zin, I became personna garat again. I said the hell with it, greece will still be around tomorrow and preceeded to have a most enjoyable meal

And sorry to say, Greece is still around and the battle withing Euroland still rages between the ECB and the Big Guys who, as we mentioned on Monday are showing signs of perhaps being prepared to practice a bit of legerdemain in order to push the can a bit further down the road by allowing the Greeks to "reschedule" some or all of the debt owed to Euro banks. So you might as, "what's the big deal?' Well, to get the answer to that one just has to look at the statement that came out yesterday from one of Greece's largest financial institutions, Alpha Bank.

Turns out, Alpha "only" (their language, not mine) owes the EUB 3.9 billion Euros backed by Greek paper which, for those of you who are regular reader will remember carries zero risk weighting as does all the paper of any member of the EU. Or to put it another way, from the standpoint of risk, there aint no difference between Greece and Germany. However, in addition to the "only" catagory Alpha hold 9.3 billion on the asset side in Greek paper which they, of course, carry at par. Now what happens if Greece does a rescheduling? Well, the paper held by the ECB no longer become eligible according to their rules, the bonds held by Alpha have to be marked to market, Alpha is kaput and the ECB's 3.9 billion is looking very dodgy not to mention the 10 billion (estimated) owed by other Greek financial institutions backed by the same paper. Remember, this is real money; Euros not dollars. In other words, in a technical sense, bye, bye ECB.

For those paying attention, "technical" is the operative word. The fact is these guys can do any damn thing they want provided they can get their political acts together...and yes, whatever they do Ireland and Portugal will be right behind. Fact of the matter is as soon as the German volk realize that not even they have enough money to bail out Spain--not that I'm saying Spain needs bailing--some accomodation may have to be found there as well. The bizarre beauty of this is that it has become such a mess that nobody...and I mean nobody...will raise a murmur of protest. Now are some people going to get hurt? Sure, but I suspect it will mostly be in the Euro banking sector and by this time if you haven't realized that banks survive on liquidity and not on some silly concepts involving capital and that central banks are uniquely designed to provide liquidy, stop reading now as your condition is hopeless. All will not be cured overnight--indeed, it will take years--but the cure will come.

Now you may have heard all the talk bubbling up about if Greece defaults their credit will be forever wrecked. That folks, is a load of crap. Financial markets have a memory and an attention span slightly longer than that of my 14 1/2 year old Wheaton Terrier but only slightly. Argentina, one of the greatest collection of thieves in mordern times stiffed their bond holders by 80% 6 years ago and look where they are today. The Leader and his mob wiped out bond holders in GM and Chrystler in 2008. Can the United States borrow today...ah, don't bring up the Fed and QE II. Bad example. The fact of the matter is there's one born every minute. The guy who will respond positively to, "Pssst, wanna buy a temple on a hill?" is already walking around.