How the ECB can dissolve the Greek debt while keeping the full amount on its balance

European Central Bankers should look at their counterpart at the other side of the Atlantic to learn how you can cook the books and solve the problems.
The European Sovereign debt crisis could be solved in the same manner as the US’ Mortgage Crisis.

The ECB is not able to apply a haircut to the Greek Debt because this would erase a part of its balance sheet. The European Central Bank has to dissolve the Greek debt obligation, while at the same time keeping them on their balance sheet.
The FED was confronted with a comparable problem, it started to buy 40 billion dollar Mortgage-backed Securities per month in 2012, while it had already accumulated 834 billion dollar Mortgage-backed Securities. One can wonder if the collateral, the underlying houses of these securities still exists and how bad the cash stream of these securities are.
But given the structure of the MBS, nobody cares.
For the FED it is no problem what the real value of the individual mortgages is, because these securities are mark-to- market and as the FED is the biggest purchaser, it sets the market price. The price of these securities are whatever the FED wants to pay for them when it buys these products and whatever it asks for it if they want to sell them.

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There is no juridical solution for Greece, no matter what they vote

Politicians and geopolitical strategist have to realize that independent Central Banks do not exist, central banks are an integrated part of geopolitics. 

“There is no plan for Greece”, explained Gefira Foundation associate in the European parliament. The mood is split between the Liberals and Socialist. The Liberal faction believes that there is only a solution possible if Greece votes yes, however the Socialist do not believe in a solution whatsoever. They see a yes-outcome as terrible as a no-outcome and fear for the future of the Euro Area.

According to the latest IMF report, Greece needs a much bigger financial support than is assumed by European creditors. Greece is not only in arrears in relation to the IMF, but “the (Greek) government has been accumulating arrears, including unprocessed pension and tax refund claims. The estimated stock stands at over 7 billion and will need to be cleared”. The IMF concluded that Greece will need an other 50 billion Euro Bailout to be able to repay its massive debt, the debt they accumulated during the European economic wonder years. We have noticed that Greece currently is running a public budget surplus.

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Egypt on the edge of a full blown civil war

In the past days there have been dozens of separate attacks in Egypt, from the Sinai up to Cairo. Probably more than 60 people have died, when the Egyptian army used F16 fighter jets to protect itself against it disgruntled population.
It is clear that the Egyptian rulers are not going to be able to contain the current situation, today could be marked as the start of Egypt’s civil war.

Democratic elected governments have been violently overthrown, in Algeria, Egypt and  Palestinian territories. In Algeria the FIS (Islamic Salvation Front)  had won the first held elections with a convincing majority in 1990 and 1992. It has been removed from power in 1992 by a coup d’etat that was highly approved by the West. Probably 150.000 people died in the civil war that followed these events up.
HAMAS winning the 2006 elections in the Palestinian territories resulted in a war among Palestinians and ended up with a split of Gaza and the West Bank
In 2011 Morsi, leader of the Muslim Brotherhood won the first free elections in Egypt.
In 2013 the first elected president of Egypt was removed by the army. There are clear signs that anti-democratic forces were deliberately destabilizing Egypt before the coup d’etat in 2013. In the running up of the July 3th coup by General Sisi an artificial oil shortages was created that contributed to the mass protest against the elected president of Egypt.
The new army coup was financially supported by the Saudi rulers while the West was mute, the only vocalized opposition came from Turkey’s ruler MrErdoğan.
Washington was silent about Egypt’s coup and even resumed the delivery of military hardware to the Egyptian rulers, at the same moment Morsi received the dead penalty during a mock process.  The situation in Egypt will be much worse than the situation that we saw in Algeria in 1992.

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Greece’s forthcoming financial collapse will not be without consequences for the Euro

This week 11.3 million European citizens will discover that their Euro’s have disappeared overnight as a part of Europe’s Banking system collapse.  Not only private banks in Greece are unable to cope with the situation but also a part of the European System of Central Banks has stopped functioning.

The fallout will not be restricted to direct loses but also include indirect loses due to political upheaval.

The Greek debt of around 370 Billion Euro’s is primarily held by institutions as the IMF (10%), Euro-Area Governments (62%) and (8%) by the ECB.
16% is probably held by private investors like Japonic Partners and Paulson & Co.
The direct loses of banks outside of Greece are limited, however the indirect damage will be tremendous. Investors and bankers will discover that the public and political support for the European Financial Stability Facility (EFSF) has been evaporate.
The indirect fallout will be immense and could trigger a worldwide financial and political crisis.

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A Greek Euro is not the Same as a German Euro.

Varoufakis, the Greek minister of finance, is one of the few who does understand monetary policies. He has no problem with expressing his opinion. His visions will be determining for the future of the EMU, the European Monetary Union. The current Greek government seems not willing to play the game of extend and pretend. The confrontation between Greece and Germany is not only about those two countries, it is about the EMU at large.
Whatever the outcome of the negotiation end up to be, the euro crisis will not be solved within the coming weeks. In the oncoming days it will only be decided if and how Greece is able to break the German hegemony on European Monetary policy. If Greece is being forced to leave the Euro zone, it will cause a huge damage on Greece and the EMU. If Greece is staying in the Monetary Union, Greeces current political leaders will keep challenging Germanys financial leadership.


Varoufakis at US conference in 2012 about; Greece, the Euro, and the failing European policy.

The Euro as an unified currency has already ceased to exist, in modern societies the Banking system is the backbone of its monetary system. Almost all transactions are done through banks and not with cash. Most corporate and private savings are stored at banks deposits. One has to realize that the euro is not about notes and coins, but about bank accounts and bank transactions. It is not the paper euro that matters, but the Euro as a deposit at a bank account. It is not hard to see that one euro on a Greek Bank account has a lower expected value than one euro on a German Bank account. Without the willingness to create a real single currency, the EMU is at risk.

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The Russia – US conflict is now a full blown Hybrid war.

The West and Russia are engaged in a full blown hybride war. They  are fighting each other in the juridical, financial and economical domain, they are engaged in cyberwarfare and proxy-wars. The future shall not be the same, expecting that the current conflict will reach new lows in the coming period. Germany is the sole Western power to prevent a further escalation of the conflict. 

Many analysts see the Ukraine conflict as the beginning of the renewed conflict between Russia and the US. It is already dubbed as “the new cold war” and being portrait as the consequence of Putin’s aspirations to rebuild the Soviet Empire. In this narrative the Russian-US conflict started at an more or less random period in the recent history.

To get a better understanding of the current conflict it is preferable to identify the Libyan crisis as the start of the Russian-US restrained relation, it is the beginning of a new kind of war: “hybrid war”.

During the Libyan conflict the NATO let coalition was granted to enforce a no fly zone in Libya, it soon escalated in a full blown illegal war against the Kaddafi regime. Not only did the NATO forces bomb government and military targets in Libya, according to the British media, Britain’s Special Forces were in disguise on the ground. It was clear that France, the US, the Netherlands and Great Britain where engaged in a full blown conservative war inside Lybia. Even though it was obvious that those armies were engaged in battles with the Libyan army,  their respective governments flat out denied that they were at war at all. The same pattern was visible over and over again during the uprise of the Syrian Jihadist movements against Assad. Syrian Jihadist were, according to Reuters, supported by the CIA from Turkey. A strategy that has been later adopted by Russia in Ukraine.

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Did German and Greece politicians passed the point of no return?

The outcome of the Greece saga is far from clear. Greece leaving the Euro could be the next Lehman moment. For that reason we did knew Greece would not leave the Euro back in 2011 Euro Crisis. For now we are less sure. The current Greece leaders see no future for Greece in the current Euro structure. In their opinion they are left with two option either crash Greece right now or suffocate it more slowly.

A member country leaving the Euro Zone will spell a lot of uncertainty and chaos for financial markets and the European economy at large. All contracts with Greece Government, companies and private persons are denominated in Euro’s. As Greece introduces its own currency it will probably start to issue some kind of IOU’s to pay its employees and contractors. This is a paper claims that promise some future payment. We have seen this strategy in California in 2009.

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