Thread: Soros, Goldman, Hedge Funds Attack Greece, Euro

Soros, Goldman, Hedge Funds Attack Greece, Euro

Financial Warfare Exposed - Soros, Goldman Sachs, Hedge Funds Attack Greece To Smash Euro

By Webster Tarpley
3-4-10

It has been evident for some time that the ongoing speculative attack on Greece, along with such other countries as Spain, Ireland, Portugal, and Italy, was not primarily a reflection of their economic fundamentals, nor yet a spontaneous movement of "the market," but rather an orchestrated action of economic warfare. The dollar had been relentlessly falling through the late summer and autumn of 2009. It obviously occurred to various Anglo-American financiers that a diversionary attack on the euro, starting with some of the weaker Mediterranean or Southern European economies, would be an ideal means of relieving pressure on the battered US greenback. Since these degenerate elites are incapable of directly solving the problem of the dollar through increased production, full employment, and economic recovery, one of the few alternatives remaining to them is to create a situation in which the euro is collapsing faster, leaving the dollar as the beneficiary of some residual flight to quality or safe haven reflex.

This is what emerged during the first week of December with a speculative assault or bear raid against Greek and Spanish government bonds as well as the euro itself, accompanied by a scurrilous press campaign targeting the "PIIGS," an acronym for the countries just named, coming from inside the bowels of Goldman Sachs. I have discussed this phenomenon several times over the last two to three weeks on my radio program on GCN.

Now comes concrete proof of this conspiracy in the form of a Feb. 8 "idea dinner," held at the Manhattan townhouse of Monness, Crespi, Hardt & Co, a boutique investment bank. Among those present were SAC Capital Advisors, David Einhorn of Greenlight Capital (a veteran of the fatal assault on Lehman Brothers in the late summer of 200, Donald Morgan of Brigade Capital, and, most tellingly, Soros Fund Management. The consensus that emerged that night over the filet mignon was that Greek government bonds were the weak flank of the euro, and that once a Greek debt crisis had been detonated, all outcomes would be bad for the euro. The assembled predators agreed that Greece was the first domino in Europe. Donald Morgan was adamant that the Greek contagion could soon infect all sovereign debt in the world, including national, state, municipal and all other forms of government debt. This would mean California, the UK, and the US itself, among many others. The details of this at dinner were revealed in the headline story of the Wall Street Journal on Friday, February 26, 2010. (See article at
http://online.wsj.com/article/SB4000142 ... 74392.html

Nor was this the only cabal in town intent on attacking the euro through the week Greek flank. The article cited suggests that GlobeOp Financial Services and Paulson & Co. are also piling on. The zombie banks were also heavily engaged. The article reported that Goldman Sachs, Bank of America-Merrill Lynch, and Barclays Bank of London were also assisting speculators in placing highly leveraged bearish bets against the euro. Note that these zombie banks are alive today because of US taxpayer money, in Barclay's case through AIG.

It amounted to a deliberate attempt to create a large-scale world monetary crisis which would certainly bring with it the dreaded second wave of the current world economic depression. The creation of monetary chaos in Europe through the convulsive destruction of the euro under speculative attack would cripple commodity production in western Europe, severely undermining one of the dwindling areas of the world economy which are still functioning. The genocidal implications for humanity ought to be obvious, but the assembled hedge fund hyenas were not concerned with these consequences.

George Soros has been telling every media outlet that will listen that the euro is doomed to fall apart and break up over the short run. Soros even has a theory to deploy as part of his speculative attack. Soros argues that the fatal flaw or original Sin of the euro is that it was based on a common central bank among the participating countries, but lacked a common treasury and tax policy. This means that a country like Greece can no longer defend itself from a speculative attack on its bonds by the simple expedient of currency devaluation, since there is no more drachma, and the euro is controlled from Frankfurt, not Athens. British spokesmen are quick to point out that, even though the financial situation of London is far worse than that of Athens, the British government is already devaluing the pound through a downward dirty float.

Given Soros's infamous track record, he must be taken seriously. In 1992, Soros became world famous through his attack on the European Rate Mechanism, which he executed by a highly leveraged speculative assault on the British pound, at the time one of the weaker members of the ERM. Soros' speculative attack led to a pound devaluation and the ragged breakup of the ERM, and netted Soros £1 billion in profits. It was as if Soros had personally stolen a £20 note from every man, woman, and child in Britain. The speculative gains were no doubt gratifying, but the overriding political purpose of the assault was to sabotage that phase of European monetary policy.

The London Economist has gone out of its way to mock Spanish Prime Minister Zapatero's remark that Spain was under international speculative attack. Press organs of the city of London and Wall Street have ridiculed the Greeks as a nation of paranoid conspiracy theorists. And yet, the revelations made so far are strong circumstantial evidence of pre-concert, as Lincoln would say. Even the US Department of Justice has been forced to send letters to the participants in the infamous "idea dinner," warning them not to destroy any of their records and thus putting them on notice that they are under investigation. While we should not have any illusions about the prosecutorial zeal of Attorney General Eric Holder, who once represented the international financial bandit Marc Rich, this is at least a beginning. Spanish and Italian judges are noted for their independence, and one of or more them may wish to examine the activities of Soros, Goldman Sachs, and their hedge fund allies.

Greece does not need an austerity program, as the Greek labor movement has eloquently argued in the course of their successful and admirable general strike last week. Greece does not need a bailout from Germany, the sinister International Monetary Fund, or from anyone else. Least of all does Greece need to accept the advice of Austrian school or Chicago schools charlatans who recommend the catharsis of a deflationary crash that would destroy an entire generation through unemployment, poverty, and despair. Greece needs to defend itself with a 1% Tobin tax on all derivatives and other financial transactions. Greece should take the lead in outlawing credit default swaps, which amount to issuing insurance without meeting the capital requirements of being an insurance company. Greece needs to enforce EU and national antitrust laws. If Soros and his gang succeed in breaking up the euro, Greece should make the best of it by immediately imposing heavy-duty exchange controls and capital controls to protect the new drachma, on the model of Malaysia a dozen years ago. Greece should shut down domestic zombie banks and seize its central bank and use it to issue 0% credit for industrial and agricultural hard commodity production. If the Greeks made plain what they intend to do if they are forced to fall back on the drachma, the financiers who fear such an example would have another reason to relent.

Another obvious expedient is that of a bear squeeze or short squeeze. Soros, Goldman Sachs, and their gang of hedge fund allies have now used derivatives to establish short positions against Greek bonds and the euro, betting that these latter will go down. Political pressure is now being brought to bear on the European Central Bank and the Greek central bank to undertake an unannounced large-scale purchase of Greek bonds and euros in the forward market, causing the Wall Street predators to lose their bets, thus punishing them severely with extravagant losses. This is normal central bank practice, and it will be astounding if the Greeks do not execute such a maneuver very soon.
The world now faces a stark choice between two alternatives, with Wall Street forcing the issue. The first is that the zombie banks and hedge funds, having been saved and bailed out by national states and their taxpayers, will repay the favor by driving the national states and all forms of state, provincial, and local government into bankruptcy. This will be synonymous with the destruction of modern civilization itself. The second and preferred alternative is that the national states summon the political will to use the inherent powers of government to place the zombie banks, hedge funds, and related purveyors of derivatives into bankruptcy receivership and shut them down once and for all, relying in the future on nationalized central banks for the provision of credit. The second alternative would allow the preservation of modern civilization as we have known it. But in the meantime, the derivatives-based speculative attack on the southern flank of the euro has accelerated the arrival of the second wave of depression, which now appears likely to strike the world before the end of 2010.

http://www.rense.com/general90/euro.htm

Fear and loathing as the hedge funds take on the euro

Gigantic bets against the euro have fuelled rumours of a hedge fund plot to cash in on the Greek crisis

By Sean O'Grady
Thursday, 4 March 2010

Fears of a hedge fund "conspiracy" to destroy the euro gathered pace yesterday when the American authorities ordered some funds not to destroy records of their trading in the single currency. The move comes after the US Federal Reserve promised to probe claims that the use of credit derivatives by Goldman Sachs had, ironically, helped Greece enter the eurozone a decade ago. Although the latest Greek austerity plan helped to calm markets and nudged the euro higher against the dollar, traders warned that the euro's traumas were far from over. Indeed, it seems that the EU and the hedge funds are about to intensify their economic warfare, with the opening of a new front in America.

The US Department of Justice has asked a number of the hedge funds whose executives attended a dinner hosted by New York-based research and brokerage firm Monness, Crespi, Hardt & Co on 8 February, to preserve their trading histories. According to an agenda obtained by Bloomberg, those present discussed a number of "themes", including the chances of the euro falling against the dollar. Aaron Cowen, an executive at SAC Capital Advisors, David Einhorn, head of Greenlight Capital, and Don Morgan, who runs Brigade Capital Management LLC went to the dinner, as did a representative from Soros Fund Management.

The presence of a Soros employee has set alarm bells ringing, as George Soros' formidable reputation as an investor – as well as a maker and breaker of currencies – goes before him. So far-reaching is his influence that any hint from him of negative sentiment towards an asset or currency can turn into a self- fulfilling prophecy.

While the meeting may have been no more than an exchange of ideas, with no commitments on any side, the presence of so many powerful American financial interests in one room discussing the euro will no doubt fuel the conspiracy theories currently swirling around the foreign exchange markets and in political circles.

The Greek prime minister, George Papandreou, has condemned speculators with "ulterior motives" for making his country's difficulties worse and destabilising the euro. If the dinner meeting in New York was part of a concerted effort to move markets it might well break US anti-trust laws. Conversely, other hedge funds have said they have avoided euro denominated sovereign debt for fear of regulatory retaliation.

The forces are massing. The value of the "bets" made by hedge funds and others against the European currency has reached more than $12bn – almost double the amount of a few weeks ago, suggesting that the pressure will persist. The number of credit default swap (CDS) contracts made to the same effect has also soared.

Many CDSs – in effect a means of insuring against the risk of default – have been taken out by those with no ownership of the underlying asset, such as Greek government bonds, in so called "naked" CDS trading. Very low interest rates provided by central banks have also made such bold currency plays more viable, as they reduce the cost of funding or "covering" them.

For the moment though, the euro seems set to survive its Greek calamity. A swingeing programme of VAT rises and public sector wage cuts were widely rumoured to be the price Greece will have to pay for the long-mooted EU bailout of around €25bn. It should also clear the way for a successful €5bn bond issue at the end of the week. As was widely anticipated, Athens yesterday announced a further €4.8bn in fiscal consolidation, about 2 per cent of GDP, in the third package in three months. There will be a rise in VAT, further tax hikes on fuel, alcohol and tobacco, and more reductions in the public-sector wage bill.

This is in line with the demands European finance ministers have been making on their Greek counterpart. Yesterday's plan also had a positive effect on the cost of insuring Greek government debt, which fell back again. However, a further €20bn will need to be raised by Greece over April and May, and more explicit assurances that the other eurozone states will stand by Greece financially may be needed.

The anticipation of a deal between Athens, Brussels and the two nations liable for much of the bill – France and Germany – was also heightened by the announcement that Mr Papandreou will meet Chancellor Merkel this Friday before seeing President Sarkozy on Sunday. By the time Mr Papandreou faces all his fellow EU leaders in Brussels on 16 March he should be able to demonstrate concrete progress towards his stated ambition of getting Greece's near 13 per cent of GDP budget deficit down to 9 per cent next year and back below the Lisbon Treaty limit of 3 per cent by 2012.

However, mutual suspicion and name-calling between the hedge funds and regulators on both sides of the Atlantic still threatens to escalate into something more serious.

The EU's new Internal Market Commissioner, Michel Barnier, said this week that he would investigate short sales of the euro and the abuse of the credit default swaps market. He is currently supervising the Commission's latest directive to regulate the hedge fund industry, the alternative investment fund managers (AIFM) directive. This measure has the potential to kill the EU hedge fund business, which is 80 per cent concentrated in London.

Clauses in the draft AIFM directive that require regulatory equivalence in territories where hedge funds usually domicile their money, such as the Cayman Islands or Jersey, would effectively end many hedge funds' life in the EU. And it is a substantial business. European hedge funds, predominantly in the UK, grew by 9.1 per cent in the second half of last year to reach $382bn, according to Hedge Fund Intelligence, part of a global wave of almost $2trillion, more than enough to move certain assets or currencies, especially if leveraged with cheap central bank money.

Lord Turner, the chairman of the Financial Services Authority said on Tuesday he backed an investigation into short speculative positions. He said: "It may be that even if you banned it, it wouldn't make a big difference, but there are questions as to whether you should be allowed to take out an insurance contract where you don't have an insurable interest."

The French Finance Minister, Christine Lagarde, has said she wants the EU to take a united approach against "speculators" betting on CDSs, and the German Finance Ministry has also called for review of "over-the-counter" products such as CDSs, which are not traded on any central exchange and, arguably, lack transparency.

Such sabre rattling is yielding results. Some hedge funds, including Brevan Howard and Moore Capital, have avoided euro-denominated sovereign debt because of the threat of a "regulatory squeeze", though they may continue to take a position against the euro itself.

Brevan Howard, Europe's largest hedge fund, with $27bn of assets under management, has said the short trade in eurozone government bonds was "extended, crowded, fully pricing the fundamentals", and indeed the CDS spreads for Greek paper have been narrowing markedly in recent weeks. The firm added that the hedge funds were facing the same sort of pressure over short-selling activity that they did at the peak of the crisis on 2008, when they were banned temporarily in some places from going short on bank shares, something that had little long-term effect on the fate of the banks.

In the war between the hedgies and the authorities, many observers believe that Spain, rather than Greece, will prove the decisive battle ground. As Spain's economy is so much larger than that of Greece, a bailout would be far more difficult to fund even for the zones largest economy Germany, where political resistance to further rescues may be insurmountable.

In the long term, the resolution of this struggle may be political rather than economic. Mr Papandreou has suggested speculation against individual nations would be rendered impossible if sovereign debt was issued by a European Treasury on behalf of all states, just as the US Treasury does. President Sarkozy has also spoken enthusiastically and often about the need for "European economic governance".

But a pooling of budget and Treasury functions across the zone would remove the last defences of German fiscal prudence: the others have gone. The Maastricht criteria, transferred to the Lisbon Treaty, limited budget deficits, national debt levels and outlawed cross-border bailouts; All have been, or may shortly be, swept away by the financial storm. The hedge funds are, in part, betting that the German government, or its people, will prefer to preserve their treasured economic security rather than the cherished political project of European unity.

As so often during momentous episodes in European history, it all depends on Berlin.

George Soros: The man that governments fear

The involvement of George Soros in the euro crisis has revived uncomfortable memories of the success – and profits – he enjoyed by betting against the pound during the ERM crisis of 1992. "The man who broke the Bank of England", he was soon dubbed, and he reputedly made $1bn from his activities then; the concern is that he will now break the euro. The influence of the Hungarian-American currency speculator, stock investor and philanthropist is such that he attracts many followers, and his bets can thus become self-fulfilling through "momentum trading". Even if he does not actually destroy the eurozone, he will leave it badly mauled.

The auguries are not good. At the Davos World Economic Forum in January, Mr Soros declared that he thought the euro "may not survive". And if there is one theme in his long career it is that he enjoys making one way bets on economic inevitabilities; often the certainty that a fundamentally weak currency will have to leave a fixed exchange rate system (as with the pound in 1992). By the spring of 1992, it was becoming clear that Britain was a part of the European Exchange Rate Mechanism at the wrong rate. It was overvalued compared to the German currency, and we were increasingly uncompetitive. The only way it could be sustained was for British interest rates to be kept far too high for UK domestic conditions (though that did hammer inflation out of the system). The pain the ERM was causing, unnecessarily, to the British economy, was becoming unbearable. Soros spotted his chance.

In retrospect, he followed what was an obvious strategy. In this case, he borrowed around £6bn and converted it to German marks at the fixed rate, shorting his sterling position. It was almost a one way bet. If sterling collapsed he would hit the jackpot. He hit the jackpot. A £350m side bet on equities rising after the devaluation was a bonus.

The Tory government led by John Major was humiliated for its economic incompetence, and was left out of contention for two decades. The political advisor to the then chancellor, Norman Lamont, was a certain David Cameron. One can guess the lessons he learned from the experience.

Almost 80 now, Mr Soros has been a pantomime villain ever since, but he perhaps did the UK a favour. "Black Wednesday", 16 September 1992, heralded a savage depreciation of sterling followed by a long period of sustained low inflation and export-led growth. The Greeks could do a lot worse.

http://www.independent.co.uk/news/busin ... 15776.html

Webster Tarpley: Bankers in slump plot against euro to save dollar

http://www.youtube.com/user/RussiaToday ... XRFII9AiQc

March 03, 2010

The Greek government has announced new austerity measures aimed at slashing its huge budget deficit. It comes a day after the Prime Minister said that the country was fighting for survival. The new measures -- which will reduce annual pay and increase taxes -- were ordered by the EU in an bid to prevent a collapse of the Euro. But street protests have been raging in Athens against the plans. Meanwhile, the U.S. Justice Department is reported to have launched a probe into leading American hedge funds. They're suspected of helping Greece cover up its debts to weaken the European currency. Journalist Webster Tarpley believes that was a plot hatched to prop up the dollar's supremacy.

Interesting points. However, the formation of the Euro was based on a shaky foundation, i.e., a "basket of currencies" comprised of a number of nations who did not have a glorious economic history to start with. These nations then gave up their economic sovereignty, but received no underlying support or group plan of action in the event of major economic downturns. Greece cannot print more Euros, and printing more of their own currency is not allowed as long as they are part of the Eurozone. Moreover, there were no real constraints on the amount of debt Eurozone members could incur. Establishing a notional limit with no means of enforcement does not cut it.

While Soros, Goldman Sachs, et al may have exploited the Eurozone's weaknesses, they are no different than turkey vultures. They are certainly going to take advantage, and go after the road kill, but they weren't driving the car.

It's beginning to look like George Soros is becoming the new Rothschild.