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BREAKING NEWS: Greece Default Is Official; Insurance Payouts Triggered

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posted on Mar, 9 2012 @ 02:19 PM
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A group representing dealers in credit default swaps decided Friday that Greek's bond swap constitutes a "credit event" that entitles holders of Greek credit default swaps to compensation. The Parthenon in Greece Scott E. Barbour | Getty Images The "yes" vote by the International Swaps and Derivatives Association triggers roughly $3.2 billion in CDS, which are insurance policies that pay out if a bond issuer defaults. That amount is actually much smaller than many had feared.


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Well guys, here's how those pesky things called credit default swaps, really work! Greece has defaulted and Greek bond holders (mainly Germany) with credit default swaps are getting paid.

Now imagine the ultimate SHTF scenario when other governments start defaulting, to include the United States, when the fed can no longer hide it's massive debt monetization scheme, and CDS payments are triggered! The problem is, credit default swap sellers are not legally mandated to have capital reserves for payment of CDS's like insurance companies are!


Still, being unregulated, there is no standard contract, no standard capital requirements, and no standard way of valuating securities in these transactions.


source

I think much of the Fed's behind the scenes actions has been to bailout the CDS market, but if the entire thing collapsed, it would make the Great Depression look like Disney Land.




posted on Mar, 9 2012 @ 02:28 PM
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tell us something which we don't know. Entire world knew it is about to happen!!!



posted on Mar, 9 2012 @ 02:39 PM
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Originally posted by BookofKnowledge
tell us something which we don't know. Entire world knew it is about to happen!!!


Yes, everyone knew Greece was defaulting. The news is that they (International Swaps and Derivatives Association) are actually correctly classifying it as a default event that will trigger payouts to those holding Credit Default Swaps --- those nasty derivative things. Things will get uglier.
edit on 3/9/12 by AnonymousCitizen because: (no reason given)



posted on Mar, 9 2012 @ 02:51 PM
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Italy Spain and Portugal should be next in line, but they better hurry as i'm sure legislation is being moved to prevent this from happening again. when will they learn when there aint no money, there aint no money.

on another note if the fed keeps printing and bailing out their buddies the dollar is sure to fail as the world currency reserve since it will be worthless on the global market.
edit on 9-3-2012 by LittleBlackEagle because: (no reason given)



posted on Mar, 9 2012 @ 04:01 PM
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So they determined it is a credit event, but they first ascertained that it was only a small amount of 3.2 billion euros, so the sky wouldn't fall in when they made the judgment.

So what does this do? Well it sets an example that any other country try following suit with 'restructuring' will be judged as defaulting accordingly, thus scaring countries away from attempting to screw over investors and seek haircuts on their debts. Although who knows, they might still try and pull the same.

Besides that, I wonder if this event is just the start of further rumblings through the financial system that will see it develop like it did throughout 2007 to 2008 in the United States where in this instance, it was mortgagees defaulting and banks going under?



posted on Mar, 9 2012 @ 04:33 PM
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Holy crap. This is big. Could start off a set of dominos.



posted on Mar, 9 2012 @ 04:36 PM
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How dangerous is this to the economy?



posted on Mar, 9 2012 @ 07:10 PM
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Can anybody here explain what it means in simpler words? I've been following the EU crisis for some time now, but this is getting too technical for me now.

So default is official by now, yet it is not a bankruptcy. I have always assumed these two terms meant the same thing, so what actually is the difference?

Is this finally the SHTF scenario we all know was coming? Is Greece crashing? Greece has to announce default by Monday I guess...I wonder how the greek people must feel this weekend


Do any of you know a link where it is explained for the common folk?

Thanks for breaking this on ATS!



posted on Mar, 9 2012 @ 08:03 PM
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Originally posted by Gab1159
Can anybody here explain what it means in simpler words?


Probably means something along the lines of "we (the common people of the world) be F'd" somehow, soon enough.

Thats how I translate everything that I hear anymore. "We be F'd... as usual".

edit on 9-3-2012 by HangTheTraitors because: (no reason given)



posted on Mar, 9 2012 @ 08:17 PM
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Originally posted by Gab1159
Can anybody here explain what it means in simpler words? I've been following the EU crisis for some time now, but this is getting too technical for me now.

So default is official by now, yet it is not a bankruptcy. I have always assumed these two terms meant the same thing, so what actually is the difference?

Is this finally the SHTF scenario we all know was coming? Is Greece crashing? Greece has to announce default by Monday I guess...I wonder how the greek people must feel this weekend


Do any of you know a link where it is explained for the common folk?

Thanks for breaking this on ATS!


In a nutshell Greece's actions to counter default, as per credit ratings agencies, set off insurance (credit default swaps). The CDS payout is being trivialized in order to calm markets and investors but no one really knows the true implications at this point. The rest of the PIIGS are in the same boat but with considerably higher debt levels. Greece is still a train wreck because they've put off bankrupting the country outright by having additional loans/bailouts put in place. They are a nation in decline in terms of producing the revenue needed to payoff their debts. The cuts being asked by government on behalf of Greece's citizens will drive them into the abyss. If history's shown us anything with Greece its that they clearly don't understand budget restraint and they continue to live well beyond their means (not everyone of course). They are simply re-arranging the deck chairs on the Titanic at this point.

What's worrisome here is that Greece's arrogance in downplaying this fiasco will serve as an incentive for the other PIIGS to say what the hell, Greece screwed over their investors, why can't we. Obviously this sets a very dangerous precedent.

That's my take, but what do I know

brill
edit on 9-3-2012 by brill because: (no reason given)



posted on Mar, 9 2012 @ 09:27 PM
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The beauty of this proxy default is that fact that they finally triggered the CDS. What nobody knows for sure is how much effect this is going to have. They have been issuing CDS backed by CDS leveraged by CDS so this could get very ugly very fast. Monday will tell the tale of just how deep this really goes as the CDS are triggered and payouts have to be made.
This could finally be the domino that takes the house of cards tumbling down, or it could be a big yawner of an event and turn out to be nothing to see here move along.



posted on Mar, 9 2012 @ 11:56 PM
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Imho, the worst part of this is what the population at large will do with their bonds when they find out their govt is willing to screw them over. It's already crossed my mind "hmmm, if the effects of this cross the Atlantic then the us govt may take the same action and devalue my bonds. Maybe I should sell them to avoid imminent loss."

If this does get around governments may see a swarm to the banks to cash their bonds not realizing the monetary value of the bond is capital for govt usage. This will push many countries closer to default. It's a vicious circle that has now begun.



posted on Mar, 10 2012 @ 12:47 AM
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Looks like Greece averted immediate default. But I thought it was official

It's being reported on several sites. Hanging on by a thread.
www.gulf-daily-news.com...
uk.reuters.com...
rt.com...
edit on 10-3-2012 by FelixFelicis because: (no reason given)



posted on Mar, 10 2012 @ 01:08 AM
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The ISDA, the ones who decide if a default has occurred, are the same ones who stand to lose if Greece defaults. Its board of directors is made up of all the major financials. somethings not right

Read all about it here: www.jsmineset.com...

edit on 10-3-2012 by Mike.Ockizard because: (no reason given)



posted on Mar, 10 2012 @ 01:10 AM
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... and btw, it's not 3 billion like the MSM is reporting. Its 10,s of trillions. chk the link.



posted on Mar, 10 2012 @ 01:34 AM
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Dear fellow Americans:

Is there enough currency in circulation for each and every resident to pay their fair share of the national debt?

No, there is not.

Is it legal to print off your own currency and make counterfiet money in order for there to be enough currency in circulation for each member of society to pay off their fair share of the national debt?

No, it is not.

Legally, is there anything I can do?

Nope. So, legally, it is not my problem.


edit on 10-3-2012 by ILikeStars because: (no reason given)



posted on Mar, 10 2012 @ 01:48 AM
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reply to post by Mike.Ockizard
 


The debt may be trillions but the insurance payout is not. The payout due to the devaluing of their bonds is 3.2 b.



posted on Mar, 10 2012 @ 02:06 AM
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Originally posted by Gab1159
Can anybody here explain what it means in simpler words? I've been following the EU crisis for some time now, but this is getting too technical for me now.

So default is official by now, yet it is not a bankruptcy. I have always assumed these two terms meant the same thing, so what actually is the difference?

Is this finally the SHTF scenario we all know was coming? Is Greece crashing? Greece has to announce default by Monday I guess...I wonder how the greek people must feel this weekend


Do any of you know a link where it is explained for the common folk?

Thanks for breaking this on ATS!


As far as i know, credit default swaps work this way:

Imagine A borrowing 100mln from a bank, and B borrowing the same amount.
A will have to pay the bank 100mln and a variable interest rate (example Libor, see wiki).
B will have to pay the bank 100mln and 10% fixed interest.

Credit default swap is literally a rate swap between A and B.
A keeps paying the bank AND will pay B a fixed interest rate of 11% (overall payment in term of interests will be Libor + 11%)
B Keeps paying the bank AND will pay A a variable interest of Libor + 1% (overall payment will be 10% + 1% + Libor)

At the end of the compensations A will pay (Libor + 11%) - (Libor + 1%) = 100mln and 10% fixed interests
and B will pay (10% + Libor + 1%) - (11%) = 100mln and the variable interest Libor

What does this mean? they swapped together theyr interest rates, making them becoming from variable to fixed and viceversa.
Where is the problem? If A (let's suppose it is Greece) cannot pay anymore B (Germany), then Germany cannot pay the bank itself and we are all back farming sheeps

Please note I can't really remember if it works exactly this way, it is from the hidden places of my memory, but at least gives you an idea of how it works and know what to look for
edit on 10-3-2012 by Bers81 because: (no reason given)

edit on 10-3-2012 by Bers81 because: grammar

edit on 10-3-2012 by Bers81 because: (no reason given)



posted on Mar, 10 2012 @ 04:57 AM
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reply to post by Mike.Ockizard
 

it's my understanding that the ones who are were selling the credit default swaps or whatever they are called are the some ones on the committee that just declared that this was a credit default....was mildly surprised that they did!!
but well, the major holders I believe are those too big to fail banks in america that we taxpayers will be getting stuck with the bill to bail out....
so, my guess is, the too big to fail banks will need to be bailed out again so they can pay this, and since they have agreed to do it, they have the assurance of the US gov't and the fed that however much money they need to do it, well, it will be given to them, in the form of near 0 interest loans...of course!!!

"Proud to be American" is quickly being changed to "Depressed to be American"!!!



posted on Mar, 10 2012 @ 05:22 AM
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This is very surprising news to me. I figured they would not declare a formal default until much later in the game, if ever, because of the strain this will put on the US banks that are responsible for the vast majority of CDS payouts. This is a game-changer...I wonder to what extent the CDSs will cancel each other out; it will happen to some extent but there are apt to be big winners and big losers.

In my completely unprofessional opinion, I bet Goldman Sachs will be a big winner. Just a hunch. Seeing as how they always seem to come out smelling like roses every time the global financial architecture shudders to its foundations in one of these increasingly-frequent mini-crises.
edit on 3/10/12 by silent thunder because: (no reason given)



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