"WASHINGTON: Big banks have failed to reach an agreement to slash Greece's debt burden, a group representing the financiers said Friday, announcing high-level talks had broken down.
A proposal to write-down a substantial portion of Greece's debt "has not produced a constructive consolidated response by all parties," the Institute of International Finance said".
The bondholders of Greek debt wants Greece to default in order to trigger their CDS contract and receive 100% payment instead of taking a huge hair cut. Although the CDS issuers (New york Banks) don't have the funds to pay for their obligations, it is certain that Federal Reserve will create new money to pay for the CDS contract on behalf of the NY Banks, because the Fed knows that the money will come back to the US to buy US debt.
According to some reports the Fed has already given the European Central Bank at least $1 trillion via SWAPS which they can leverage to $10 trillion or more. The leveraged funds would then come back to the US to buy US debt. The amount is enough to delay the endgame by up to one year.
This indirect money-printing by the Fed is bullish for the equity markets, commodities, gold and silver, etc. It is also bullish for longterm bond, as this is part of the "twist" program recently enacted by the Fed. With that amount of extra liquidity, it is possible for the Fed to drive the US longterm interest rates down much lower that what it is now.
- The risk to this extraordinary amount of money creation is very high inflation and eventually hyperinflation.
- The risk of not creating enough money is deflation and eventually hyperinflation.
Either way, the west is doomed. The path to hyperinflation will depends on the path the governments of the west will take. It is either inflation then hyperinflation (currency collapse) or deflation then hyperinflation (currency collapse).
