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  Jim Kingsland

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  General News, Jim Kingsland Blog

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  2/22/12

  The New York Tines must be reading my mail. I have long been harping about the danger Credit Default Swaps, otherwise known as CDS (I have described what these are before so you must know what they are: insurance mostly on sovereign debt). Now the Times is reporting that there are renewed concerns about the vast world of the Quadrillion dollars worth of CDS. No, NY Times, as usual you fail The concern about CDS has never gone away and remains much like the long lasting (as in eternal) background radiation of the universe.

  From the Times:
  “Greece’s debt restructuring is dragging credit-default swaps back into the spotlight.

  The last time this financial instrument was on the global stage was in 2008, when the American International Group’s credit-default swaps brought the insurer, as well as the wider financial system, to the brink of collapse. A.I.G. had unique weaknesses, and regulators have started to overhaul the credit-default swap market since 2008.

  European policy makers have nonetheless looked warily at credit-default swaps, at least until recently, while they structured the Greek rescue over the last six months.

  They aimed for a voluntary debt exchange that would not initiate the default swaps, fearing that payments on the swaps might set off destabilizing chain reactions through Europe’s financial system.

  But now, with Europe’s $172 billion aid package for Greece, it appears that the nation is going to take a step that substantially increase….” Please read more here: DealBook: Greek Crisis Raises New Fears Over Credit-Default Swaps http://nyti.ms/w6mfq3Jim again:

  Jim again: It’s nice to see the NY Times play some catch up. What has been worked out this week for Greece is a band aid solution for a ruptured artery.

  CDS is the lynch pin of the financial system. This is why the nearly $200 bln Greece deal has been slapped together. The reality is, there are no partial defaults. There can be no credit events that would trigger the massive amount of credit default swaps. The new bailout is throwing bad money after bad and paves the way for another bailout – or else.

  Anyway, if you don’t believe me, just look at what Fitch has done today. They have downgraded Greek paper to JUNK status and state that Greece is on the cusp of default. Fitch says near term default is “highly likely”. Interestingly, Fitch has upgraded ICELAND. This was the country that would NOT go along with the austerity that the banksters were demanding in 2008 and have since extracted from Greece.

  • ICELAND RATINGS RAISED TO INVESTMENT GRADE BY FITCH
  • FITCH UPGRADES ICELAND TO ‘BBB-’; STABLE OUTLOOK
  • FITCH DOES NOT EXPECT ICELAND TO SLIP BACK INTO RECESSION
  • FITCH SAYS ICELAND GOVERNMENT DEBT PEAKED AT 100% OF GDP IN ’11

  Yes, it pays to burn the banksters. Don’t tell that to Greece and its slave driver known as Goldman Sachs.
  Regarding Greece, Zerohedge writes:

  “We thought we had seen it all. It turns out we hadn’t. The country that gave the world the alphabet, philosophy, and plates with funny sexually ambiguous drawing s on them, has outdone itself again. Because beginning this month some Greeks will have to pay for the privilege of having a job. From the Press Project:

  Salary cutbacks (called “unified payroll”) for contract workers at the public sector set to be finalized today. Cuts to be valid retroactively since november 2011. Expected result: Up to 64.000 people will work without salary this month, or even be asked to return money. Amongst them 21.000 teachers, 13.000 municipal employees and 30.000 civil servants.
  Needless to say the BLS is salivating at the prospect of US workers paying for a job, as this will immediately allow them to double count said person’s role in the employed part of the labor force (which incidentally has shrunk by 1% in the time it took to write this), as the money said “worker” pays can be used in the BLS hedonic models to theoretically hire many more people courtesy of fractional reserve lending. Now if only everyone would agree to pay for the joy of playing Solitaire 9 to 5, then all the world’s problems would be solved.”

  AMAZING. Original post at: http://www.zerohedge.com/news/its-official-greece-unveils-negative-salary#comments

  A few other items of note:

  As noted yesterday, gold has become a bit overbought and is pausing today. It is during these pause times that gold becomes vulnerable to raids by the paper players. But (and this is a big but), gold’s recent momentum makes it ever harder to get much more than a day, or three of consolidation after rallies (at least thus far in 2012). More than anything, on-going purchases of gold by Asian buyers, including Central Banks, continue to keep a floor under the market. I doubt that late last year and it was a mistake. The so called Asian put and Bernanke’s actions of what I have been calling QEx (a more subtle way to sneak in additional monetary accommodation) assure further rallying power for gold, and many other commodities.

  I recall they used to do this is Russia: Owe IRS Taxes, Lose Your Passport – Forbes http://onforb.es/zSoRt2

  Rising oil prices, at $106 this morning, are hard to ignore. When will the mainstream media report on the debacle of $4 gasoline and somehow excuse certain DC politicians lol? High oil prices test U.S. economy, Obama | The Raw Story: http://www.rawstory.com/rs/2012/02/22/high-oil-prices-test-u-s-economy-obama/#.T0T_hY0w_dg.twitter

  Have a great Wednesday!

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