by Sean Jobst
May 26, 2015
Through Credit Default Swaps (CDS), Goldman Sachs helped the Greek government - I believe it essential here to highlight the corrupt government, not the Greek nation or people who were never party to the agreement - keep billions of dollars worth of debt off their balance sheet. This "helped create a debt bubble that would later explode and bring about the current economic crisis that's drowning the entire continent," writes economic observer Mark Weisbrot. "Goldman Sachs, however, using its insider knowledge of its Greek client, protected itself from this debt bubble by betting against Greek bonds, expecting that they would eventually fail."
In February 2010, six banks and investment firms - including Goldman Sachs and Deutsche Bank - granted the Greek government a loan in the amount of €8 billion. Corrupt Greek politicians were treasonous when they sold CDSs from the Greek Postal Bank, to the current speculators. These CDSs were then flipped a few months later for $27 billion, most of which was quickly pocketed by these currency vultures and a handful of corrupt politicians. The Greek people were never party to this secret contract, yet they were the ones who were being held responsible for the inevitable crisis. The loans to Greece were bailouts of creditors and not to the people!
The credit debts were insured through the scheme of credit deficit swaps. The banksters lend out cost-free government guarantees they create out of thin air, insuring them for billions and trillions, for which they receive billions more in "premiums". The banksters pocketed the insurance for these amounts created from thin air - amplified a hundredfold. They then get credit for state guarantees backed by taxpayer money.
"Wall Street institutions made a profit of 500 percent within three months through CDS papers in the beginning of the Greek crisis." (Spiegel.de, 5 May 2010) In October 2011, the bankers demanded two trillion Euros. They successfully hoodwinked Greece into giving up its own currency - the drachma - which had existed for 2,700 years, which was like destroying their identity.
Goldman Sachs CEO Lloyd Blankfein boasted before the U.S. Congress that his company sold non-existing wealth to governments and public institutions alike, completely out of thin air. He boasted how Goldman Sachs kept 90% of all monies from bailouts and investments. Blankfein knew the risks for the Greek nation, but him and his ilk did not care, because they wanted to turn a huge profit. The Greek people suffered, while Blankfein and his cabal of robber-baron bankers are living it up!
In the case of Greece, over 90% of the sales revenue of these "investments" went to the firm's salary and bonuses, with most of the remaining 10% going for "administrative costs." Obviously, the bankers profited immensely from the bailout which did not benefit Greece - and certainly not the Greek people themselves, who suffered from this swindle.
Dictatorship by Credit Agencies
The rating agencies helped perpetuate the fraud, pretending that their price was valued correctly, masking the reality that these ratings were all artificially-designed to give profits to these private rating agencies. In 2006, the agencies rated Greece as "extremely good." In 2010, the Greek economy fell by 4.5% and then another 4% in 2011. As soon as a country falls below a certain "rating limit" artificially set by these agencies, the CDSs increase - and both are set up in such a way that the "debt" is never ending, with interest upon interest perpetually!
The so-called "ratings" of these private investment firms has led to a "dictatorship by rating grade allocation. The rating agencies have unprecedented power. Half of Europe trembles at their verdict. The politicians have made them powerful." (Frankfurter Allgemeine Zeitung, 18 June 2011) This was evident on June 17, 2011, when German Chancellor Angela Merkel and French President Nicolas Sarkozy met in Berlin to announce the terms for a new Greek "bailout", but dutifully invited the rating agency Finch, which proved its political clout by negotiating with the politicians the terms which they would accept for not giving a negative rating for Greece - blackmail, pure and simple!
In May 2010, Greece was "saved" with €110 billion, including no less than 85 billion for CDS "bets." In June 2011, the agencies rated Greece in the "red" to the tune of €330 billion, which increased to "around 350 billion Euros" only two weeks later. (Die Welt, 17 June 2011, p. 4) To drive up the settlement price - and thus their profits - Greece was downgraded by the rating agencies.
While issuing credit to EU countries at up to 30% interest, the European Central Bank made the money available to the private bankers at only 1% interest! The ECB then repurchased their own money at exorbitant interest rates. "The ECB has capital of only 82 billion Euros, yet it has 1,900 billion Euros in paper on its books. These are mainly Greek junk bonds." (Die Welt, 25 June 2011, p. 17)
The Austerity Swindle
The Greek economy was further ruined by newly-invented "austerity" measures, which forced the nation to hand over its national assets to the private international bankers/"investors", in a process code-named "privatization." At the moment these "austerity" measures are accepted, yet another lowering of the nation's "creditworthiness" is announced. The agencies then increase their loans without any limit being imposed.
Spain was another test example: "The financial world demanded that Spain initiate a policy of austerity and cost-cutting; but as soon as Spain began to seriously comply with their demand, they lowered Spain's credit rating. The Finch agency changed its evaluation of Spain's creditworthiness, saying that the austerity program would choke off its growth." (Stern.de, 29 May 2010)
One of those instrumental in wrecking the economies of the southern European countries was the New York-based banker Bill Lipschutz was the foreign exchange market trader who directed the Portfolio Department at Hathersage Capital Management, which specialized in G-10 currencies, including the Euro:
"Every morning Lipschutz gets up at two or three o'clock to see what the markets in Europe are doing....Nobody knows whether the Greeks will be able to solve their problems. Nobody knows whether the other countries will come to their assistance. Nobody knows whether the crisis can be contained in Greece or will spread like wildfire among 'the PIIGS' (Portugal, Ireland, Italy, Greece and Spain) and the European currency will finally disintegrate. These represent shining opportunities for currency speculators, they can place bets on the fall of the Euro." (Der Spiegel, No. 8, 2010, p. 64)
A measure of austerity is achieving an keeping a primary surplus, which is what a government earns in taxes every year, minus what it spends on everything else except interest payments on its own debt. This becomes part of the Gross Domestic Product. Under its four-year-old bailout program, Greece dragged itself from a 10% deficit to a 3% surplus, at great cost in employment rates. The terms of the recent bailout demand Greece reach a surplus of 4.5% and hold it for the length of the program, but few countries have even been able to maintain a 3% surplus, much less 4.5%. (Brendan Greeley, "Why Greece Won't Ever Be Able to Pay Off Its Debts With Austerity," Bloomberg Business Week, February 19, 2015)
The insolvency of the banks
The anti-austerity protests happened because the people got tired with being held responsible for the secret deals between private bankers and investors with corrupt governments and politicians. As the Greek finance minister Yanis Varoufakis - one of the few Marxists I respect and admire completely - has said repeatedly, the Greek economic crisis is essentially an insolvency problem, not a liquidity issue that requires bailing out failed banks or giving out more loans.
Varoufakis connected this to the issue of the banks, observing how they want to sell off their own bank debt by selling off Greece's assets. Thus we see the root of the problem is to focus on insolvency, but the international bankers and their media and political whores insist on obfuscating the real root of the crisis, advocating phony "solutions" which can only lead to more profits for the bankers and more heartache for the Greek people. On the February 2nd episode of Russia Today's "Keiser Report", banking analyst Frances Coppola was quoted as saying:
"Everyone knows Greece is insolvent, of course, but no-one has ever stated it officially. The Troika's [EU, ECB, IMF] position is that Greece's problem is a temporary liquidity shortfall: lending it more money so it can meet current debt service obligations is justified because structural reforms will lead to renewed growth and increased income, enabling it to meet its obligations (including those for the new loans) in the future. But Varoufakis disagrees with this interpretation. His view is that while things remain as they are, Greece will never recover. The bailout program locks it into a debt deflationary spiral which simultaneously reduces its income and increases its debt burden. Continuing to accept more loans in order to meet debt service obligations only makes matters worse."
Syriza and the Road Ahead
In an interview with British Channel 4 News, Varoufakis said he has three main objectives: First, deal with the humanitarian crisis in Greece. Second, reform the country in such a way that it addresses the root cause - what he called the "triangle of sin." He defined this triangle as the procurement aspects of the State, the bankrupt bankers, and the mass media. He described the "unholy alliance" between bankrupt bankers, developers and media owners who become the voice of those who want to sponge off the people's productive efforts. Finally, to renegotiate the loan agreements which he correctly said have been destructive to Europe as a whole, not only to Greece.
The Syriza government has announced if there is no deal, they might return to the Drachma. "They want us to impose capital controls and cause a credit crunch, until the government becomes so unpopular that it falls," one Greek official stated. "They want to make an example of us, and demonstrate that no government in the eurozone has a right to have a mind of its own. They don't believe that we will walk away, or that the Greek people will back us, and they are wrong on both counts." There is already discontent within Greece that the government will cave into EU pressure to extend its bailout and the austerity that comes with it, fears that have led to many protests.