Forget Greece, Traders Are Worried About Something That Could Send Us Back To The Middle Ages!!!

What fun is that? Then they can't enslave humanity.

Write it off. They call it a "hair cut" in their language. What used to be considered a default, BK, is now a "hair cut."

Here's the fucking problem with everything right here: [link to www.isda.org]

At link is a list of all the members of the committee that votes to determine when a credit event occurs, which intern triggers the credit default swaps.

The great thing about the committee is that it is made up of all the big banks (the ones that write the contracts and promise to pay out if there is a default or credit event):

Americas

Voting Dealers
Bank of America / Merrill Lynch
Barclays
Citibank
Credit Suisse
Deutsche Bank
Goldman Sachs
JPMorgan Chase Bank, N.A.
Morgan Stanley
Société Générale
UBS

Those banks likely hold about 99 percent of the swaps contracts. I mean they are talking about a 50 percent reduction of Greek bond values as not being a credit event. Who are they kidding? No one but themselves.

They get to play criminal, jury, judge and executioner all in one: The International Swaps and Derivatives Association.

For them it's whatever it takes to keep the CDS from triggering

zerohedge GREECE MUST DELIVER OR FACE UNDESIRABLE COURSE, GERMAN DEPUTY FINANCE MINISTER KAMPETER SAYS

[link to twitter.com]

zerohedge Moody's places ratings of Bank of America's covered bonds on review for downgrade

The Real Reason The Rest of Europe Is Just Torturing Greece Now



In a post last night, economist Tyler Cowen asked: "Is the goal simply to irritate the Greeks so much that they leave the Eurozone on their own?"

Here's what might be going on.

Sometimes in life you give someone a "shot" at something that maybe they don't deserve. You hire them, despite the fact that their qualifications were marginal. Or something like that. Bottom line is, you think you're doing them a favor, and you're also putting your reputation on the line a little bit. But you expect that they'll step up and really appreciate the opportunity they have. And you expect they'll kill it.

And when they fail — which is likely, because they might not have deserved the opportunity — you're furious at them, because you gave them this great opportunity and they totally blew it, and they made you look like an idiot at the same time. And you just hate them for it.

And that's what's going on now. Europe feels like it gave Greece a "shot" with Euro membership, and multiple bailouts. And now it looks to Greece and sees people rioting, and the reforms not happening, and they're furious like never before. Merkel, Schaeuble, and the rest just can't fathom that Greece was given this great shot to be a rich, wealthy European nation and it's totally blowing it.



Read more: [link to www.businessinsider.com]

One interesting tid-bit is one does not need to own the instrument on which the CDS is written. This means that the security can be underwritten numerous times for those that want to make that type of play (read: bet).

For those anticipating a default on, say, a $100K LAISD GP Bond, finds an underwriter that believes the bond will mature to term and will take a small percentage of the value per year to wager that the bond does make term. Easy money, right? But if LAISD fails to make coupon payments and defaults on the bond, the counterparty gets face value.

The underwriters see it as easy, nearly risk free, income.

The counterparties see it as a cheap bet with the possibility of a significant payout. And the counterparty does not need to own the financial instrument.

These things (CDS's) flew under the radar due to the way the transactions are conducted. No trading mechanism or OTC market.

CDS's should never have been allowed IMHO. It's betting and should have been left in Vegas or Monaco.

A couple of clarifications needed...

First, CDS contracts might be used in ways similar to insurance, but they are not regulated like insurance underwriters, who are required to maintain enough assets to cover a certain volume of their contracts (varies by jurisdiction). Otherwise anyone could just sell you insurance and when you need it they just shrug and say too bad. CDS contracts work like the latter. The seller may or may not be able to cover the contract amount. Most often they will cover the risk (on the balance sheet anyway) by buying contracts from yet another party to cover losses should they have to pay out... which 3rd parties do the same, creating an endless chain of potential defaults.

Second, the total amount and value of CDS is not unknown, it is tracked and published by the Bank of International Settlements (oddly ISDA does not track it themselves, they refer to BIS data). BIS figures as of Q2 2011 indicate a notional value of CDS contracts at $30 Trillion with a market value of about $1.3T

But CDS are just a small part of the total OTC derivatives market, which the BIS puts at a whopping $708 Trillion (the largest portion being interest rate contracts at $554T notional value). Just for comparison the World Bank estimates total world GDP at just $70T!

So what happens when a global chain of defaults is triggered to the tune of 10X all the money in the world? No one knows really. The banks say don't worry about it, most of the contracts cancel out. This is true hypothetically, but the actual result is sure to be far more chaotic. That is a heck of a lot of accounting to do overnight just to see who is solvent and who is not.

Hey Louis, greetings from Greece!

Just to give you a heads up, there is a prominent Greek, Kyriakos Tompras, who knew from the first moment that Papandreou had CDS in his possesion and had effectively bet on the default of Greece. He sued him right away and the case has still to be heard in a court of law.

Anyway, the point is that this man came forward on Monday, saying that he will soon have ALL the CDS contracts that have been placed against Greece, along with their current owners. If he manages to get them, it's gonna be huge!

His site is: [link to www.stopspeculators.gr]

do we know who/which banks are CDS issuers?

I don't care what triggers it, let the worldwide crash begin. Let the present system burn to the ground and start another one that isn't controlled by a select few, that the money is backed by precious metals or something tangible.

Highly likely true. I saw a research e-mail in early October 2008 from an European financial research firm which stated that the problem we were seeing back then was nothing compared to what was the real problem, probably 50 times worst than what we were being told back then : derivatives.

The e-mail stated that all those government meetings back then were to try to minimize the problem and not let the public know how bad it really was and how bad it could really become.

Your posting states it all ... Derivatives related = GODZILLA SIZE PROBLEM!

AIG that had to be bailed out back in 2008 here in the US is the guarantor insurance company for the American originated CDS's and secured mortgage derivatives sold mostly to China.

I used to read Christopher Story Global Analysis, he always hated Bush, and Deutshe Bank for forcing the play in Greece.

He stated right before he died, (other than the Bushes tried to kill him that post, his last post was removed cause he said he escaped the attack but then was dead less than two weeks later) that Obama had to let Interpol in and give them special rights and privleges over government heads and alphabet agencies that they were acting as till tappers, or like marshalls executing after a judgement and taking it out of the till or off the top. Sure enough I was looking at Obamas signed executive orders and there it was interpol is here and taking it off the top. If you never read Christopher Story his stories are still online. Spicy stuff