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Portugal Owes £7.9Bn By June But Only Has £4Bn


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http://uk.finance.yahoo.com/news/Stricken-Portugal-lacks-cash-tele-1419540407.html?x=0

Emma Rowley, 20:13, Wednesday 30 March 2011
Portugal insisted it could cope with looming debt repayments, after analysts warned it does not have enough money to meet its obligations.
The debt-laden nation faces around €9bn (£7.9bn) in bond redemptions by June, but currently has no more than €5bn in cash, analysts at Barclays Capital estimated.

Looks like they will join Ireland and Greece as the third in a long list of sovereign bailouts. Good for the Euro though as the more debt the bettrr they like it.

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They could do what the banks do.

As the debt has been downrated and will be trading at much lower than 100% face value, they could just buy the bonds back on the bonds market at a deep discount instead of repaying.

Banks did this.

Bank owes 100m. Bank downgraded. 100m debt now trading at 80m. Bank buys the 100m debt for 80m, books 20m profit, bonuses all round.

Then the bankers got even smarter. They realised that because they COULD buy the debt back at 80m, that meant they only needed to list it on their books at an 80m liability instead of 100m. Net result was each time the banks debt got downgraded, the bankers were able to book the reduction in the trading value of the debt as a profit and pay bonuses. No, I'm not kidding.

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They could do what the banks do.

As the debt has been downrated and will be trading at much lower than 100% face value, they could just buy the bonds back on the bonds market at a deep discount instead of repaying.

Banks did this.

Bank owes 100m. Bank downgraded. 100m debt now trading at 80m. Bank buys the 100m debt for 80m, books 20m profit, bonuses all round.

Then the bankers got even smarter. They realised that because they COULD buy the debt back at 80m, that meant they only needed to list it on their books at an 80m liability instead of 100m. Net result was each time the banks debt got downgraded, the bankers were able to book the reduction in the trading value of the debt as a profit and pay bonuses. No, I'm not kidding.

It goes one step better. At the same time as marking down their liabilities, they moved assets from trading books (mark to market accounting) to banking books (accrual accounting) to protect the accounting value of the very assets that caused their liabilities to get cheaper.

This accounting chicanery allowed them to present balance sheets that were in much better shape optically than they were fundamentally.

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It goes one step better. At the same time as marking down their liabilities, they moved assets from trading books (mark to market accounting) to banking books (accrual accounting) to protect the accounting value of the very assets that caused their liabilities to get cheaper.

This accounting chicanery allowed them to present balance sheets that were in much better shape optically than they were fundamentally.

It's not 'accounting chicanery', it's 'wealth creation'. Get with the program...

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