This thing that looks like that thing: Greek bailout Edition (UPDATE-1)

A little over a week ago, Peter and Simon over at the Baseline Scenario wrote the following:

To restore confidence in buying Spanish and other major European nation bonds, it would surely help to have clear signals that President Obama himself, and the Federal Reserve, are taking an active stance now on making sure this does not spread to become another threat to global financial stability. A broader wall of preventive financing must now be put in place – after all, this is exactly why (in principle) the IMF was recapitalized this time last year.

Then Greece got a bailout of EUR 110MMM, but there was still trouble and John Mauldin wrote:

...30% of the Greek financing will come from the IMF ... and since 40% of the IMF is funded by US taxpayers, and that debt will be JUNIOR to current bond holders ... US tax payers will be giving money to Greece who will use a lot of it to roll over old bonds, letting European banks  and funds reduce their exposure to Greece while tax-payers all over the world who fund the IMF assume that risk. And does anyone really think that Greece will pay that debt back?

As if it wasn't enough that the ECB went back on their word and is allowing GGB to be repoed for liquidity regardless of the rating--this is the part where the ECB engineers a super-steep yield curve to transfer depositors money to bank balance sheets--now they are going to monetize the Euro debts.

I told you they were going to take your money. Let's file this one under, "this is not progress," shall we?

UPDATE-1: The WSJ reports that the US share of this is actually more like 17% and so we are only on the hook for $3MMM or so.

A little more on Greece

Last nigh,t I blogged about the inevitability of some kind of bailout and how liabilities don't just vanish, they just move to bigger balance sheets until they can't anymore and they need to be spread amongst a large number of individuals. Today, Peter and Simon over at the Baseline Scenario wrote the following:

To restore confidence in buying Spanish and other major European nation bonds, it would surely help to have clear signals that President Obama himself, and the Federal Reserve, are taking an active stance now on making sure this does not spread to become another threat to global financial stability. A broader wall of preventive financing must now be put in place – after all, this is exactly why (in principle) the IMF was recapitalized this time last year.

ATTENTION SAVERS OF PLANET EARTH: They are going to take your money. Whether it is through taxes, inflation, lost profits or non-performing assets. It sucks and I am completely against it, but, by definition, you can only take something from someone who has it, and you are the only ones with money.

For those of you old people reading about this Greek debt crisis and thinking, "8% isn't that bad, my mortgage used to be 11% in the 80s, why should they get a cheap IMF loan?" Let me just put it this way: The additional yearly debt-service of refinancing the long term debt coming due in the next 8 months and 2011, assuming it is refinanced at a similar maturity, would be an additional 175MM EUR. So, as they are dealing with recession, strikes, and a giant budget gap in a deficit they need to shrink, their debt-service rises 175MM. They are fighting an uphill battle.

For any of you econ geeks, if you haven't already, I suggest you read David Merkel's Of Credit Ratings, Sovereign Risk and Semi-Sovereign Risk as well as The Whole Earth is Owned; Debts Net Out to Zero. My writing could never compare.