02/16/10 Stockholm, Sweden – With the same sense of destructive impunity shown against AIG the height of the US crisis, financial services firm may now be profiteering from the Greek debt turmoil that currently has the eurozone in a bind. Andrew Cockburn takes a look at how some of the usual suspects may be encircling the easiest prey around, a limping Greece:
“…Wall Street gamblers – banks, hedge funds and other players. Scenting blood in the water, they have been busily placing enormous bets on whether the Greeks would go belly up or be helped out by the Germans. They do this through the medium of ‘credit default swaps’, a form of insurance against default by Greek or any other bonds. Typically, this kind of so-called insurance protection will be offered by a pension fund or some similar institution looking to earn a nice income from premium payments.
“The buy[er]s of the protection will be hedge funds looking to make fast money if the insured bonds lose value and the seller has to pay out. Sitting between them is Goldman, JP Morgan, Bank of America or some other big bank who broker the trade between buyers and sellers. Since this market lacks any transparency – the banks have effortlessly crushed congressional initiatives for reform in this area — these spreads and consequent profits are huge.
“Once everyone has made their CDS bets, the buyers will start beating down the value of the insured bonds – in this case the Greeks. The air has been thick with reports of imminent Greek default, the Greeks’ financial irresponsibility, etc.”
Cockburn later adds that the “economic velociraptors” fight over the savory meat, describing ferocious greed as deciding which firms survice and which get the spoils:
“…a former U.S. Treasury official told me that the story, ‘more smoke than fire,’ [of Goldman Sachs and Greek cross currency swaps] had been leaked by a Goldman competitor, ‘Lazard, JP Morgan, Deutsche — take your pick,’ adding that ‘the velociraptors are ripping chunks of flesh out of each other in a fight to the death.’”
It’s interesting to consider whether and how this behavior is taking place. Certainly, if it’s true in Greece then the technique is likely also in use elsewhere in the euro area. Spain has, at the least, complained of overly-harsh treatment from the Anglo-Saxon establishment. Read the complete article at Counterpunch, in its coverage of economic velociraptors in Greece.
Rocky Vega
Rocky Vega is publisher of Agora Financial International, where he advances the growth of Agora Financial publishing enterprises outside of the US. Previously, he was publisher of The Daily Reckoning, and founding publisher of both UrbanTurf and RFID Update -- which he ran from Brazil, Chile, and Puerto Rico -- as well as associate publisher of FierceFinance. Rocky has an honors MS from the Stockholm School of Economics and an honors BA from Harvard University, where he served on the board of directors for Let’s Go Publications, Harvard Student Agencies, and The Harvard Advocate.
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What you have to try and remember is that velociraptors were the forerunners of pack hunters. These were no lone wolf hunters so to speak. They cooperated to bring their prey down.
Now I’m not saying those major financial firms are in cahoots to fleece Greece in order to line their own pockets, but I sincerely doubt they are battling each other as this would hinder the ability to garnish maximum profits from the victim.
They may say nasty things about each other for public consumption, but be shaking hands and patting each other on the back behind closed doors congratulating themselves for finding such an easy sheep to sheer.
Part I
Treating on surface of an illness will not will be the solution. We have to dig out the root. More importantly the underlying causes.
First, US made the biggest blunder in causing the down fall of the socialist states. For the simple reason that western type of democracy simply cannot single-handedly handle the whole world issue, especially countries with large population which remained in poverty.
Prior to the downfall of socialism, the world was in total equilibrium and perfect balance. Following the introduction of market economy in the former socialist states, production of good and services increases by leap and bounds, due to the fact that the poor has much time to sacrifice in production. Eventually, many a developed nations find that they are out of business and their national debt increases sharply.
Second, why was US continuously targeting the communist rival, as though if they didn’t die, US would not rest or sleep well at all? And, they are/were so supportive of the Chiang’s administration to the extent of total commitment. Why? Was it just for the sake of the same religion? If so, then another big blunder. US was being fooled and made use of by Chiang. Chiang’s defeat was largely due to the following facts.
A. Corrupt governance.
B. Women foot-binding.
C. Sino-Japanese war.
Corrupt governance brought in wide spread corruption. Their money printer was even busier than nowadays. To the extent that you need sacks of paper money to buy a single item of essentials.