Fraud, Lies, and Cover-ups: The Greek Debt Crisis

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“This is an attack on the Euro-zone by certain other interests, political or financial.” – Greek Prime Minister Papandreou.

When it comes to the crisis in Greece, it seems as if everyone has an opinion. The burgeoning Grecian debt crisis has been used as the final scapegoat for a thousand-point drop in the stock market, while Greece itself has been proclaimed a ‘plague of bad debt,’ which unless dealt with swiftly, threatens to over run the European market. Probe a little deeper under this mess, however, and you will find an aggressive and fixated media, credit and investment fraud, as well as shady attempts to destroy the Euro. But before we can delve into the seedier side of this murky issue, we must first understand what caused the Grecian crisis, and just how international banking and debtor nations work, if only on a basic level.

greek debt crisis Fraud, Lies, and Cover ups: The Greek Debt Crisis

Greek Prime Minister George Papandreou (center) arriving for an EU summit in Brussels

Cracks in the Greek economy began to appear in 2009, as growth turned negative for the first time since 1993. Although Greece managed to remain above the Euro level, it suffered from over-lending, a corrupt government, and bureaucracy stifling growth. In the early part of 2009, the loans to savings ratio topped 100%. By the end of 2009, the greater global crisis coupled with uncontrolled spending at local levels, due largely in part to the 2008 election, left Greece faced with its most severe economic crisis since 1993. Greece claimed the infamous position of having the second highest budget deficit after Ireland, and the second highest debt to GDP ratio in the European Union. The budget deficit stood at 13.6% of GDP; coupled with rising debt levels of 115% of GDP in 2009, led to increased borrowing to pay off debts, resulting in a severe economic crisis.

Most governments are currently relying on the greatest of economic opiates; paper money. Debtor economies of the Western world require more and more paper money to survive, which in turn is made increasingly more worthless by inflation. International bankers who create money without foundation, and loan it to the nations of the world, have made immense fortunes from the interest on such loans. When the interest grows too much to pay off, then the nation borrows even more money to feed their addiction to debt repayment. This of course means that more loans are given in ever higher amounts as the currency they are issued in is worth less and less.

Even the most powerful of nations cannot escape the debt-trap. The United States, for example, will now find it mathematically impossible to pay off her debt. Among other nations caught in the trap of spiralling debt, are Italy, Germany, Australia, and Spain. Greece was no exception in following the well tried and tested formula above; the country ran into trouble and it borrowed money in an attempt to extricate itself from rising debt. Simple. But as the country sought to borrow more-and-more cash, however, tough ‘austerity measures’ were put into place. Now why would that be?

But instead of letting the Grecian market collapse, the international banks who loaned it money preformed a quick dialysis. They would jump-started the Greek economy with funding, and in that way they (the bankers) could continue to profit from the suffering of a nation. To this end, a 750 billion Euro ‘bail-out’ was orchestrated, between the IMF and the European Union. Olli Rehn, the European Commissioner for Economic and Financial affairs went as far as to say that ““We will defend the Euro, no matter what it takes.” What he neglected to mention was the 5% interest rate attached to the bailout. An unrealistically high rate of interest by all assessments.

Shortly after Rehn’s announcement, ECB stated that they would begin a process of ‘Quantitative Easing‘–the purchase of large amounts of corporate debt and loans via Grecian bonds. What confounded me at the time is just why ECB were attempting to ‘stabilize’ a region using a method that had proved unsuccessful for the Japanese years before during their very well-documented economic crisis.

The funds given to Greece would keep the country afloat in the short-term, but the eventual collapse would be that much worse, for no matter where you look for news of the Grecian crisis, talks of a ‘domino effect’ are never far behind. Those countries currently most affected by the crisis are extremely concerned about the picture that the American and British media have been painting. In Spain, President José Luis Rodríguez Zapatero launched an investigation using his nation’s intelligence agency, and while the measure was considered ‘over the top,’ and a ‘laughable’ disguise of insecurity in the anglo-media, Zapatero’s choice showed more than a glimmer of reason.

Unsurprisingly, many ‘financial experts’ aligned themselves with hedge-fund managers and their cronies, including Jeffery Frankel, a Harvard University economist who said, “What we have seen is that contagion has gone global.” According to Rintaro Tamaki, “All the financial markets are now in turmoil … The impact of the Greek crisis has gone beyond the Euro area.” Anders Borg, the Financial Minister of Sweden was on board the financial-apocalypse boat, adding “We now see herd behavior in the markets that are really pack behavior, wolfpack behavior.” Even more shocking, however, an article in The Guardian stated how “Riots and strikes in Greece could be repeated in other countries which have yet to adopt their own austerity packages.” Other countries which have yet to adopt their own austerity packages? With this sort of spin on the issue being given by the Anglo-media, it is no small wonder that Spain feels as if it stands on shaky ground. But this doesn’t have to be so. Greece doesn’t have to be the all destroying harbinger of financial apocalypse, unless they want it to be. I’ll repeat myself here; Greece is not the first domino unless the international bankers say it is.

Euro banknotes Fraud, Lies, and Cover ups: The Greek Debt Crisis

The hedge-fund managers said ‘it is’ back on February 8^th. An ‘idea-dinner’ held at the Manhattan town house of Monness, Crespi, Hardt & Co, a boutique investment bank. Among those attending were George Soros (Soros Fund Management), SAC advisors, David Einhorn of Greenlight Capital and Donald Morgan of Brigade Capital. During the course of the meeting, they saw fit to bet against the Euro, Greece and other southern European countries now afflicted by the crisis at hand. Donald Morgan in particular was certain that Greek debt could ‘infect’ the rest of the world. Merril-Lynch, Bank of America, Barclays, Goldman-Sachs, and other banks that still exist only because of public funds taken from taxpayers, are at the core of the financial melt-down in Greece.

The consequences of a second, bigger melt-down in Greece, and the destruction of the Euro by large financial concerns would be enormous; as would be the profits for a few select individuals. Investors are betting up to twenty times their holdings, in a market that dwarfs the daily trading volume of the British pound, which itself suffered underneath similar ‘bearish’ moves. George Soros led the charge that devastated the British Pound in 1992, and wouldn’t think twice about destroying the Euro via Greece. Do you think they wouldn’t do such a thing? The U.S. Department of Justice has already warned them not to destroy any documents pertaining to the meeting. Soros hasn’t been too shy of the media circuit spotlight, stating that the ‘euro could fall apart’ mere days after the secretive dinner meeting. I don’t believe that Attorney General Eric Holder will pursue the issue with much vigor, as he assisted in the pardoning of both Marc Rich and Pincus Green. What does come with some level of reassurance is that those Spanish and Italian judges who have seen their countries so terribly afflicted by the current situation may pursue legal recourse.

Speaking of austerity packages, Mervyn King, governor of the Bank of England went as far to say that “….whoever wins this election will be out of power for a whole generation because of how tough the fiscal austerity will have to be.” In the United States, Federal Reserve Chairman Ben Bernanke spoke along similar lines. Bernanke claimed last April that “To avoid large and ultimately unsustainable budget deficits, the nation will ultimately have to choose among higher taxes, modifications to entitlement programs such as Social Security and Medicare, less spending on everything else from education to defence, or some combination of the above.” Of course, the American contribution to the Grecian bailout comes a year after a statement Bernanke made concerning cutting retirement and healthcare funds ‘That’s where the money is.’ Money that couldn’t be spent. So apparently America must cut social funding, yet there is enough money lying around to go ahead and assist in the Grecian bailout caused by investors from America? We have so far spent 6.8 billion dollars. Those are funds that were considered ‘unspendable’ for social programs but perfectly fine to assist in driving a country further into a hole, absolute madness.

While hedge-fund managers carry much of the blame, credit rating agencies don’t have their hands clean of the matter either. Without the role they played, it is entirely possible that some of the deals made would not have been accepted. Credit rating agencies such as Moody’s, S&P, and Fitch have each played a critical role in the crisis. It is important to note that out of those three companies, S&P and Moody’s are solely based in America. Fitch is based in both New York and London. Similar to how credit rating agencies gave toxic assets and loans packages triple-A ratings here in the United States; credit rating fraud was no different in Greece. Triple-A ratings are the highest possible ratings, which are only supposed to be given to loans with minimal risk. When we look at some of the packages given, we can see a web of fraud. This fraud was an attempt to deliberately mislead Greece and further damage the Euro. As if this wasn’t enough, further damage to the Euro was incurred when Greek stocks and bonds were being traded at junk-level weeks before earning that designation.

The credit rating agencies can easily explain how investment banking managed to do so much damage to Greece. Goldman-Sachs in particular has had a high level of involvement in the Grecian crisis. Beginning in 2002, Goldman-Sachs was one of the many banks that offered cross-currency swaps. During these cross-currency swaps, Grecian debt was swapped from Euro to dollars and yen, and would then be changed back to the original currencies at a later date. If all these institutions wanted to do was to hurt the Euro, it wouldn’t be difficult. The acquiring of Grecian debt, switching it to a stable currency and then changing it back would be devastating. It would not only damage the value of the Euro, but would deliver a blow to the infrastructure of the Greek nation.

While cross-currency swaps are common for nations, Goldman-Sachs set the exchange rates at fake levels. As a result, Greece got a much higher sum than the actual market value of $10 billion dollars or yen. Goldman-Sachs managed to add an astounding amount of credit, up to $1 billion dollars for the Greeks without the Greeks knowing about it. The best part is that while the trade took place, it isn’t on any books. Due to the deals made during the Grecian government’s deals with Goldman-Sachs, Goldman now also owns the rights to airport fees and lottery proceeds in Greece for years. Furthermore, Goldman-Sachs as well other banks speculating in the Greek market used credit default swaps as a way to bet on the Grecian collapse. The purpose of credit default swaps is a method for a large investor such as Goldman-Sachs to obtain financial protection in case its investments go bad, in theory at least.

Amazingly, credit swaps are unregulated. Coupling this with the fact that there are no limits as to how many can be created and issued, the market can surge rapidly several times over compared to the original assets being insured. The final nail in the coffin of integrity being that investors whom are arranging the swap don’t actually need to have the ownership they are arranging the swap to cover. Therefore, it becomes profitable to bet on the lendee defaulting as you receive even more funds for a failed venture. It’s similar to everyone else on a street buying fire protection on someone’s house and then collecting when it gets burned down. Something that would be illegal in the insurance racket is perfectly legal in investment banking and Wall Street.

Even that wimpiest of Wall Street critics, Ben Bernanke, managed to get the guts to say something about the mess. “Using these instruments in a way that intentionally destabilizes a company or a country is — is counter-productive, and I’m sure the S.E.C. will be looking into that.” Even though Bernanke managed to give a mild protest, I have next to no faith that Goldman will get much more than a wag of the finger for this or any other ‘questionable’ business it has conducted. A lack of punishment will of course only reinforce this behaviour. As Marshall Auerback, a professor of economics at the University of Missouri-Kansas City stated “As [credit default swap] prices rise and Greece’s credit rating collapses, the interest rate it must pay on bonds rises–fuelling a death spiral because it cannot cut spending or raise taxes sufficiently to reduce its deficit.”

While the forces that acted to worsen the Greek crisis get away, the Grecian working class is brutalized. The measures implemented to slow the inevitable are quite familiar. Lower wages, reduced workforce in the public sector, cuts in benefits, rising gas prices, tax increases, bonus cuts….out of all those affected, the real losers are working people of Greece. The VAT is already being increased for a second time, now up to 23%. Whatever your take on the Grecian crisis is, the fact that ‘austerity’ measures in other nations are being called for is worrisome to say the least. Nothing has been fixed. The rich have gotten richer, the poorer have gotten poorer, and the inevitable collapse will be that much more catastrophic. The bond maturities for Greece range between 10-15 years, I believe that this will have an astronomical impact on its deficit when the debt comes to fruition, and without another round of emergency funds, Greece may very well default under the pressure. Certainly, now after Greece owes the world $300 Billion, a Grecian collapse a decade down the road would certainly be felt. More so than if it happened before the bailouts, back-room deals and slough of chicanery Greece has bumbled through. The EU Chief stated that ‘democracy could disappear’ in those countries most afflicted by the crisis. Greece may be the very tip of a particularly troublesome iceberg, a floating sepulcher in a sea of greed, guile, and corruption.