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How Much Leverage Could You Buy For 26 Trillion Dollars?

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This does not get mentioned very often in relation to the ongoing Greek Vs Eu situation- I guess it does not fit too neatly into the narrative that Greece is an entirely disposable component of the greater glory of the EUSSR.

Anyhow- according to the BIS the total of derivatives tied to the Euro is 26.45 Trillion dollars. As ever with derivatives the claim is often made that in reality these types of contracts net out and so can be dismissed as irrelevant- but this assumes that the currency itself is still around.

I have no idea what the implications are of 25 Trillion dollars worth of OTC contracts suddenly being bereft of the currency to which they are linked - which is the outlier risk that a Greek exit from the Euro poses-in the extreme case.

Is there anyone who can shed some light on this? What fate would befall these contracts if the Euro began to wobble?

Edited by wonderpup

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At the very last hour, I would think the ECB would structure any exit. They would throw money at Greece (for free) to keep the system going that bit longer, and Greece would leave in stages if necessary, thus protecting to a degree these derivatives. A disorderly market wouldn't suit the establishment. But don't count on it, I don't think any bureaucratic body would be that organised.

It would work like this. Greece and it's EU partners have decided that it would be best that Greece leave the EURO for the time being. The EU will grant Greece xxxX EUROS which will have zero interest, and it will be paid back at their convenience, and all current debts will be frozen, However the ECB will back all Greek bonds...etc... . Greece will not officially leave until 2020, where plans will be drawn up... etc... This will be a drawn out, so the markets don't have that much uncertainty. Well that's what I might do.

And yes, the Danish, and Swiss (De-peg) recent currency moves have predicted the future. The Euro probably will be devalued to pay for this plan.

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If only Noel was still posting.

The notional value isn't the potential loss value, what the loss value is no one really knows but everytime we get near a trigger and a default declared everyone appears to bottle it.

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This is quite comical; apparently there is a known unknown when it comes to a Greek default;

UN Aware of Greek Derivatives Risk as Weekend Talk Roils Insiders

What is the most important issue not being addressed in public surrounding the Greek sovereign debt default issue?

UN Addressing Greek Derivatives Issue Behind The Scenes

The primary issue with the derivatives underlying the Greek economy is transparency, a recent topic of behind the scenes conversations at the United Nations. In an upcoming Wall Street Unfiltered podcast, to be released Tuesday, UN sovereign debt expert and Executive Director of Jubliee USA Eric LeCompte revealed nonpublic discussions on derivatives and organized sovereign default process that he said was in the “shadowy” world.

Greece has a little wildcard called unregulated derivatives default. The extent of the damage a Greek derivatives default is unknown to key market participants and regulators, as is the resulting defaults in other European countries and debitor nations.

This is in fact an issue of world security, a topic LeCompte says is being addressed behind the scenes at the U.N., as questions about dangerous derivatives exposure and its unknown impact on world security appear at stake. This is a situation with few winners and mostly losers.

Speculation is the biggest losers in such an event are likely to be the European financial community and the writers of derivatives insurance, said to be led by Goldman Sachs, who could suffer significantly during a default event, particularly one that spread to the wrong places. UBS, author of the report, is said not to be involved in unregulated derivatives to the same degree as Goldman Sachs.


What a joke these people are- they are actually playing Russian roulette with a weapon of unknown destructive potential- a weapon built by the Giant Squid itself- no wonder Obama is on the phone to Merkel.

Most fascinating of all is this little gem on their 'containment' strategy;

The primary method of derivatives risk management at this point appears to be the use of force on several levels to motivate Greece to recognize the reality of a government leadership on the run from economic justice.

What the f*ck???

Leaving aside the hilarious notion that grinding the Greeks into financial oblivion could in any sense be described as economic 'justice' it seems their entire strategy is not to negotiate in good faith with the Greek Government but to somehow brow beat them into submission by force into accepting the idea that they should sell out their own people and the democratic mandate they were given in order to save the collective faces of those who did indeed sell out their own people by agreeing to their own austerity programmes without so much as a whimper of protest.

So who has most to lose in this game- Greece or the morons who have allowed an unknown quantity of OTC gambling debts to be created by wall street gangsters?

Maybe not so contained after all?

Edited by wonderpup

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