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If Greece defaults on all its debts, the IMF and ECB will be fine…Eurozone nations will get crushed.

The costs and consequences of Greece exiting the Eurozone may well dwarf the financial losses triggered by Greece’s default.

Alex Christoforou

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Post originally appeared on charleshughsmith.blogspot.com.

The term Jingle mail originated in the great popping of the housing bubble 2008-2011. It refers to defaulting homeowners mailing the keys to their house back to the lender, and it denotes the finality of default: it’s over.

The dream of ownership and easy wealth leveraged by vast debt: over. The dream that loans to marginal borrowers were as good as loans issued to qualified buyers: over.

And most importantly, the lender’s dream that marginal borrowers could somehow make the payments if the terms were tweaked is also over.

Which brings us to the jingle mail Greece is about to send Europe. Greece is analogous to the marginal home buyer who took on way more debt than the household could afford. Europe is analogous to the lender, who faces a spectrum of unsavory options:

1. Accept the reality of default, write off the loans and accept the horrendous losses.

2. Play for time by renegotiating the loan, reducing the payments, stretching the payments over a longer period, etc.

3. Bury the non-performing loan as zombie debt: the loan disappears from the performing loans but isn’t listed as a non-performing loan, either. It has become a zombie loan, neither performing nor non-performing.

Both of the latter strategies are versions of kicking the can down the road: what the lender does not want to do is report the loss and deal with the consequences (such as insolvency, lawsuits, etc.)

So the lender strings the debtor along, squeezing enough interest out to justify the claim that the loan is performing and the asset (i.e. the loan) is still worth its listed value.

The European leadership has done a grand job of stringing Greece along to maintain the illusion that default is not inevitable and final. This stringing the debtor along has yielded impressive returns for Greece’s lenders, at considerable cost to non-Oligarch/non-vested-interests Greeks. Note how little of the Greek “bailout” actually went to the citizenry of Greece and how much was interest paid to Europe’s financial powers.

greek-debt

The loans to Greece benefited both Europe’s financial Aristocracy and Greece’s oligarchies/ kleptocracies. This is ably demonstrated in the recent essay Misrule of the Few: How the Oligarchs Ruined Greece.

Although much has been written about the Troika (the International Monetary Fund–IMF, the European Central Bank–ECB, and the Eurozone), this chart reveals that the IMF and the ECB have relatively little skin in the game. If Greece defaults on all its debts, neither the IMF nor the ECB will be dealt a crippling blow.

The Eurozone’s constituent nations will not be so fortunate: they are on the hook for most of Greece’s loans. Should the loans be written off, the losses will go directly to the nations that ponied up the bailouts and other funds.

Greek-debt2-15

Let’s turn to why mortgage lenders have let tens of thousands of defaulted homeowners continue to live rent-free in their jingle-mail homes. If the lender starts liquidation proceedings, the loan immediately becomes non-performing, and the fantasy that the lender will receive the full principle and interest will shatter.

So it’s actually cheaper, in terms of consequences, to let the defaulted borrower continue to live in the home for free. This monthly loss is far more bearable than the enormous loss that must be accepted should the lender start foreclosure proceedings and write the mortgage off.

The Eurozone may well decide that Greece does not have to exit the EU, for analogous reasons. If Greece defaults and exits the Eurozone, the entire Eurozone project is at risk. What’s to stop the other member nations groaning under unpayable debt from defaulting?

The costs and consequences of Greece exiting the Eurozone may well dwarf the financial losses triggered by Greece’s default. Once Greece puts an end to the fantasy that all the principal and interest will be paid in full at some distant point, Greece’s lenders will be forced to jettison the public-relations illusion that tweaking the terms made everyone whole.

That will leave them with only two options: either accept the losses incurred by Greece’s default, or shove Greece’s debt into the zombie column–neither performing nor non-performing.

What’s the PR cover for this zombie status? “Negotiations are continuing.”

Meanwhile, the government of Greece will no longer be able to borrow more money. It will only be able to spend whatever cash it collects. The dream of living beyond one’s means will end. The people of Greece, meanwhile, will continue using euros and remain in the Eurozone.

What’s not to like? Greece doesn’t have to exit the Eurozone, nobody has to pony up more money for a lost cause, and the write-off of debt that will never be paid is set aside in the highly convenient zombie debt status.

Yes, Greece still owes all that principal and interest, and no, it’s no longer making payments, but negotiations are continuing and officials will indefinitely remain close to reaching a deal to squeeze blood from a stone.

References:

http://charleshughsmith.blogspot.com/2015/05/when-europe-gets-greeces-jingle-mail.html

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Petro Poroshenko and Theresa May: failed leaders on the same disastrous trajectory (Video)

The Duran Quick Take: Episode 37.

Alex Christoforou

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The Duran’s Alex Christoforou and Editor-in-Chief Alexander Mercouris take a quick look how UK PM Theresa May and Ukraine President Petro Poroshenko are willing to destroy their country in the pursuit of pleasing their globalist masters, while retaining what little power they still hold.

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https://soundcloud.com/user-901836666/petro-poroshenko-and-theresa-may-failed-leaders-on-the-same-disastrous-trajectory

Via Zerohedge


Ukraine’s president has recently warned Russian tanks are amassing along the border between the two countries amid increasing tensions. The comments came late last month after three Ukrainian naval boats were seized in the Kerch Strait by Russia.

President Petro Poroshenko has allegedly shown images of what he claims to be hundreds of tanks preparing for an invasion.

He told Sky News:

“This is the tank base just 18km from our border, this was happening in September, October, and now.”

“This is 18km from my border, this is the same warehouse where they have their ammunition, the same where they have multi-rocket launch systems, we should be prepared to protect my country.”

Satellite imagery from Google Earth taken sometime in November from the Defense Blog has verified Poroshenko claims. Photos show hundreds of Russian main battle tanks at a new military installation in the Kamensk-Shakhtinsky region.

The Russian base is about 18 kilometers (11.1 miles) away from the rebel-held territory in eastern Ukraine. Images show hundreds of main battle tanks, with thousands of military trucks, support systems, artillery pieces, tankers, and troop transport vehicles.

Russia has been quietly building up its forces near the border with Ukraine since late summer and now has a military force greater than 2014, the year Moscow annexed Crimea, Viktor Muzhenko, the commander of Ukrainian armed forces, told Reuters in an interview last week.

In front of us is an aggressor who has no legal, moral or any other limits,” he said. “It is very difficult to predict when it will occur to him to begin active combat actions against Ukraine.”

“This (the Kerch Strait incident) was an act of aggression from regular forces, the border service (of the Russian Federation) in relation to the Ukrainian armed forces,” Muzhenko added.

Eric Zuesse via The Strategic Culture Foundation, made a great point in October that Washington is now treating Ukraine as if it were a NATO member, donating warships and military equipment to the country for use against Russia. This is the latest indication that America’s military-industrial complex is shifting to Ukraine as the epicenter to start World War III, and from which the nuclear war is to be sparked against Russia.

There is a reason why Russia is amassing hundreds of main battle tanks on the Ukranian border, that is because the next geopolitical flare-up is right around the corner, likely to occur during the next global recession.

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Canada PM Justin Trudeau in way over his head with Huawei CFO arrest

The Duran Quick Take: Episode 36.

Alex Christoforou

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The Duran’s Alex Christoforou and Editor-in-Chief Alexander Mercouris take a quick look at Justin Trudeau’s response to U.S. President Donald Trump and Chinese officials over of stories around the arrest of Huawei’s CFO in Vancouver and the detention of a former Canadian diplomat in China.

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Follow The Duran Audio Podcast on Soundcloud.

Via Zerohedge


China Arrests Former Canadian Diplomat As Government Fears Reprisal For Huawei CFO
Is this one of the “severe” reprisals threatened by Beijing when it summoned Canada’s ambassador to Beijing for a meeting over the weekend?

According to Reuters, former Canadian diplomat Michael Kovrig has been detained in China. Kovrig’s employer, International Crisis Group, is working to secure his “safe” release.

The reason for Kovrig’s detention wasn’t immediately clear, and Beijing has refused to comment on his detention. However, Reuters noted that the arrest of Huawei CFO Meng Wanzhou has “stoked fears of reprisals.”

“International Crisis Group is aware of reports that its North East Asia Senior Adviser, Michael Kovrig, has been detained in China,” the think-tank said in a statement.

“We are doing everything possible to secure additional information on Michael’s whereabouts as well as his prompt and safe release,” it added.

China’s Foreign Ministry and Ministry of Public Security did not respond immediately to questions faxed earlier about Kovrig’s detention.

The exact reason for the detention was not immediately clear. The Canadian embassy declined to comment, referring queries to Ottawa.

Kovrig, a Mandarin speaker, has been working for the ICG as an in-house “expert” since February 2017. Prior to that, he served as a diplomat for the Canadian government between 2003 and 2016, with stints in Hong Kong and Beijing.

And while it’s possible that the timing of Kovrig’s arrest is purely coincidental, the timing is certainly suspicious.

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Ukraine Wants Nuclear Weapons: Will the West Bow to the Regime in Kiev?

Efforts to prevent nuclear proliferation are one of the few issues on which the great powers agree, intending to continue to limit the spread of nuclear weapons and to prevent new entrants into the exclusive nuclear club.

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Authored by Federico Pieraccini via The Strategic Culture Foundation:


The former Ukrainian envoy to NATO, Major General Petro Garashchuk, recently stated in an interview with Obozrevatel TV:

“I’ll say it once more. We have the ability to develop and produce our own nuclear weapons, currently available in the world, such as the one that was built in the former USSR and which is now in independent Ukraine, located in the city of Dnipro (former Dnipropetrovsk) that can produce these kinds of intercontinental ballistic missiles. Neither the United States, nor Russia, nor China have produced a missile named Satan … At the same time, Ukraine does not have to worry about international sanctions when creating these nuclear weapons.”

The issue of nuclear weapons has always united the great powers, especially following the signing of the Non-Proliferation Treaty (NPT). The decision to reduce the number of nuclear weapons towards the end of the Cold War went hand in hand with the need to prevent the spread of such weapons of mass destruction to other countries in the best interests of humanity. During the final stages of the Cold War, the scientific community expended great effort on impressing upon the American and Soviet leadership how a limited nuclear exchange would wipe out humanity. Moscow and Washington thus began START (Strategic Arms Reduction Treaty) negotiations to reduce the risk of a nuclear winter. Following the dissolution of the USSR, the Budapest Memorandum on Security Assurances persuaded Ukraine to relinquish its nuclear weapons and accede to the NPT in exchange for security assurances from its signatories.

Ukraine has in recent years begun entertaining the possibility of returning to the nuclear fold, especially in light of North Korea’s recent actions. Kim Jong-un’s lesson seems to be that a nuclear deterrent remains the only way of guaranteeing complete protection against a regional hegemon. The situation in Ukraine, however, differs from that of North Korea, including in terms of alliances and power relations. Kiev’s government came into power as a result of a coup d’etat carried out by extremist nationalist elements who seek their inspiration from Nazi collaborator Stepan Bandera. The long arm of NATO has always been deeply involved in the dark machinations that led to Poroshenko’s ascendency to the Ukrainian presidency. From a geopolitical point of view, NATO’s operation in Ukraine (instigating a civil war in the wake of a coup) follows in the footsteps of what happened in Georgia. NATO tends to organize countries with existing anti-Russia sentiments to channel their Russophobia into concrete actions that aim to undermine Moscow. The war in the Donbass is a prime example.

However, Ukraine has been unable to subdue the rebels in the Donbass region, the conflict freezing into a stalemate and the popularity of the Kiev government falling as the population’s quality of life experiences a precipitous decline. The United States and the European Union have not kept their promises, leaving Poroshenko desperate and tempted to resort to provocations like the recent Kerch strait incident or such as those that are apparently already in the works, as recently reported by the DPR authorities.

The idea of Ukraine resuming its production of nuclear weapons is currently being floated by minor figures, but it could take hold in the coming months, especially if the conflict continues in its frozen state and Kiev becomes frustrated and desperate. The neoconservative wing of the American ruling elite, absolutely committed to the destruction of the Russian Federation, could encourage Kiev along this path, in spite of the incalculable risks involved. The EU, on the other hand, would likely be terrified at the prospect, which would also place it between a rock and a hard place. Kiev, on one side, would be able to extract from the EU much needed economic assistance in exchange for not going nuclear, while on the other side the neocons would be irresponsibly egging the Ukrainians on.

Moscow, if faced with such a possibility, would not just stand there. In spite of Russia having good relations with North Korea, it did not seem too excited at the prospect of having a nuclear-armed neighbor. With Ukraine, the response would be much more severe. A nuclear-armed Ukraine would be a red line for Moscow, just as Crimea and Sevastopol were. It is worth remembering the Russian president’s words when referring to the possibility of a NATO invasion of Crimea during the 2014 coup:

“We were ready to do it [putting Russia’s nuclear arsenal on alert]. Russian people live there, they are in danger, we cannot leave them. It was not us who committed to coup, it was the nationalists and people with extreme beliefs. I do not think this is actually anyone’s wish – to turn it into a global conflict.”

As Kiev stands on the precipice, it will be good for the neocons, the neoliberals and their European lackeys to consider the consequences of advising Kiev to jump or not. Giving the nuclear go-ahead to a Ukrainian leadership so unstable and detached from reality may just be the spark that sets off Armageddon.

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