S&P, the notoriously incompetent rating agency that was a prime enabler of the credit crisis, has declared that Greece is in “selective default.”

This is, of course, an act of belated cowardice on the part of S&P. When a borrower informs their lenders that they will a) Not be repaying the full loan amount; and b) Not making those reduced payments on time — they are technically in default. When they then  fail to make the full payments on time, they are actually in default.

Hence, Greece defaulted quite some time ago. This nonsensical dance of the rating agencies not wanting to roil the waters during difficult periods reveals how meaningless rating agencies have become. They are, as my ranching cousins so colorfully describe it as teats on a bull.  In short, they are without purpose.

The Greeks they never qualified as members in the first place; it is an unnecessary burden on the Greek people.

I suggest that the Greek government formally default. They should tell Germany to “πηγαίνετε γαμηθείς” — then leave the EU and the Euro.  Once they go back to the Drachma, their economy will recover, their exports bloom, and their tourism revive.

In the meanwhile, the Greek drama inexorably goes on . . .

Category: Analysts, Bailouts, Really, really bad calls

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

8 Responses to “S&P: Greece in Default (Late to the Party Again!)”

  1. Anabela Reis says:

    Krugman Says Greece Running Out of Alternatives to Quitting Euro Currrency

    Nobel-prize winning economist Paul Krugman said Greece is “close” to having to leave the 17- member currency region as austerity measures imposed on the nation hamper its economic recovery.

    “If I were running a peripheral country I would say that you cannot leave” the euro region, Krugman, a professor at Princeton University, said in Lisbon late yesterday. While it would be “extremely disruptive,” Greece is “very close to running out of alternatives,” he said.

    Germany’s parliament approved a second Greek aid package in Berlin yesterday, part of a plan agreed earlier this month to stem the debt crisis. Still, finance officials from the Group of 20 nations meeting in Mexico over the weekend rebuffed pleas for additional funding through the International Monetary Fund, saying the region first needs to boost its own resources. European leaders are scheduled to meet in Brussels March 1-2.

    Greece’s credit ratings were cut to “Selective Default” by Standard & Poor’s yesterday. S&P dropped Greece’s rating from CC, two levels above default, after the government added clauses to its debt designed to mop up investors unwilling to take part in a bond exchange, according to the statement.

  2. [...] "Oh look, Greece is in default again."  (TBP) [...]

  3. rktbrkr says:

    What means “selective default”?

    They are being forced to keep the ECB whole, they may be forced to keep other central banks whole, the only thing that is semi clear is that private bond investors will get stiffed and if the central bankers aren’t taking losses then the private investors will be taking ever larger losses when they get divvied up. Is anything less than 100% haircut on these bonds not a “credit event” for private investors? Great business for those writing the credit “insurance”, money for nothing.

    Don’t know why private investors would get credit ins for bond purchases from other PIIGS with this precedent, but thats just icing on the cake, why would they buy PIIGS bonds at all without a huge premium?

    Italy just had a pretty successful bond sale, I wonder how much of that was by Italian institutions coerced into buying the bonds.

  4. Bokolis says:

    Have you ever dealt with S&P? You’d be surprised if they ever get anything right.

    And, “πηγαίνετε γαμηθείς” is way too formal for my cousins. It would actually go like this- and we’ll do this with English symbols b/c I can’t teach my phone where to put the accent marks on curse words: “a’e yamisou mori poutana.” That they’ve taken to calling Germany a “poutana,” a term that has always been reserved only for England, should indicate their desperation and heightened level of petulance at not being given their allownace.

    I really don’t think Greece would leave the EU on its own. WIthout the EU, they’d effectively return to the 3rd world status that existed 30 years ago. The rub is that their potential aggressors have only gotten richer and stronger, something Greece is woefully unprepared to handle.

  5. BenGraham says:

    You have ranching cousins?

  6. baychev says:

    barry, you suggest that once greece defaults and leaves the EU & EZ it will be all champagne and roses for them… but you are neglecting that they hardly have anything to export and the country is quite a cheap destination already and most importantly, the EU has import quotas for non-community trade partners.
    your suggestion hardly makes any sense.

  7. farmera1 says:

    I think you guys are missing the main point here. All the waltzing around is being done to save the banks, the Greek people can go pound salt, they aren’t the main players here (until they are). US banks according to FORTUNE (Jan 6 page 11; In the Midst of the Eurozone Meltdown, a Ticking Time Bomb has Gone Unnoticed: A shaky Derivatives Market) magazine have a few hundred billion in
    CDS on European debt. No body knows how much or who actually holds all the CDS, but they are out there. So Greece goes down, the banks (including European banks) go down again.

    Here is an article from the FT about saving the banks.

    ECB ‘SAVES’ BANKS AS ECONOMIES SINK

    http://www.ft.com/cms/s/0/af0f74ba-4d82-11e1-b96c-00144feabdc0.html#axzz1nhC62IuO

    “Last year, a nasty feedback loop opened up as rising sovereign default risk in Italy and Spain fuelled concerns about the asset quality of European banks. Depositors started to become restive. Falling stock prices and rising credit spreads caused difficulties. The interbank loan market froze over. As the panic endured, Europe’s banks were forced to shrink their assets.”

    “This was a very dangerous state of affairs which, had it continued unchecked, might well have led to major bank failures. In early December, however, the ECB announced it would extend the length of its funding to European banks to three years. Banks immediately applied for nearly €500bn from the Long-Term Refinancing Operation (LTRO). A second LTRO, which many expect to be twice as large, will be launched by the ECB at the end of this month.”

    The little people are just a nuances, pawns in a high stakes poker game where the players at the table aka bankers have gotten rich,with unregulated derivatives being used as chips for the gambling. If this sounds familiar it is, the derivatives blew up before and in all probability they will blow again. But the ECB and the FED are doing everything they can to prevent the implosion.

    It will be interesting to read a history written in about 10 years concerning the banks their wanton ways and how the governments of the world were sucked (not innocently I might add) into saving the banks while raping the economies.

  8. realgm says:

    The whole bailing out Greece drama is just to bail out the banks in France and Germany. It just another backdoor bailout to the banksters. While in the process, they can take away all assets from Greece including its gold reserve, the right to use the ports, the islands, etc.

    Greece gov’t should have defaulted long ago and return to the Drachma. Devalued the Drachma by like 50%, inflation would be crazy and things will get tough. It would be painful but relatively short term. Once Drachma drops to the point that traveling to Greece becomes very attractive, tourists would start spending money in Greece and getting it back on its own feet. If things work out, this could be a 1 to 2 years recovery time.

    With the current bailouts, Greece would just get into more and more debts and the Greeks would suffer much much longer.