But WHO has the edge over OBAMA?
For "investors," read Wall Street gamblers banks, hedge funds and other players. Scenting blood in the water, they have been busily placing enormous bets on whether the Greeks would go belly up or be helped out by the Germans. They do this through the medium of "credit default swaps", a form of insurance against default by Greek or any other bonds. Typically, this kind of so-called insurance protection will be offered by a pension fund or some similar institution looking to earn a nice income from premium payments.
The buys of the protection will be hedge funds looking to make fast money if the insured bonds lose value and the seller has to pay out. Sitting between them is Goldman, JP Morgan, Bank of America or some other big bank who broker the trade between buyers and sellers. Since this market lacks any transparency the banks have effortlessly crushed congressional initiatives for reform in this area -- these spreads and consequent profits are huge.
Once everyone has made their CDS bets, the buyers will start beating down the value of the insured bonds in this case the Greeks. The air has been thick with reports of imminent Greek default, the Greeks' financial irresponsibility, etc etc. As the value of the bonds decreased, the CDS sellers had to pay out money to the buyers, "posting margin." This is what Goldman Sachs did to AIG in 2008, thus ensuring the latter firm's ruin.
With Greece "in play" the flow has ebbed back and forth. As the fate of Greece see-saws, both sellers and buys have been making money, as of course have the banks in the middle. None of this has much to do with the underlying condition of the Greek economy. There was no particular reason why Greece should have become a crisis just now, except that it was their turn. Joseph Stiglitz, one of the very few economists worth listening to, has been pointing out that the Greek economy is not in immediate crisis and that this has been a speculative attack, but most business commentators are not paid to report things that way. Instead, the Greeks have been admonished to pull their socks up, cut government spending by firing thousands of public employees (thus exacerbating the recession) and pay their debts.
In the hunt for the rich pickings, competition among major powers on Wall Street has been fierce. Someone told Der Spiegel that Goldman-Sachs had nefariously helped Greece cover up the true depth of its debt situation through creative use of cross currency swaps, which involved "the Greek government issuing debt in yen and U.S. dollars which were than swapped for debt in euros over a specified period of time. After a period of years the currencies will be traded back to the original currency." Though this would seem like a good deal for the Greeks in the short term, in the long term it will cost them dearly.
The report was clearly inimical to the interests of Goldman. Asked if true, a former U.S. Treasury official told me that the story, "more smoke than fire," had been leaked by a Goldman competitor, "Lazard, JP Morgan, Deutsche -- take your pick," adding that "the velociraptors are ripping chunks of flesh out of each other in a fight to the death." Such wholesome plain speaking is not of course current in the White House, where Obama prefers the term "savvy businessmen," at least when referring to JP Morgan and Goldman CEOs Jamie Dimon and Lloyd Blankfein.
Excerpted from Alexander Cockburn @ Counterpunch
Masters of the Universe and Crooks all rolled into one. Destroying companies and countries for their own entetainment and enrichment and then get bailed out instead of going to jail when they fall short.
