Message #17663

[Psalm 51:17]

The ECB Has Opened Pandora’s Box
19 February 2012, by Mark Grant, author of "Out of the Box and onto Wall Street" (Zero Hedge)
http://www.zerohedge.com/news/ecb-has-opened-pandora%E2%80%99s-box

Excerpt:

The ECB, on its own and without judicial or parliamentary review, has swapped their Greek debt for new Greek debt that is not subject to any “collective action clause.”

They did this unilaterally and without the consent of any other sovereign debt bond owners of Greek debt.

They did this without objection of any nation in Europe.

They have retroactively changed the indenture, the contract made by Greece with all of the buyers of their bonds, when the debt was issued.

There is no speculation involved in these statements, there is no longer any guesswork on what might be; the ECB swapped their bonds for new Greek bonds with the assent of the Greek government and it is now a done deal. 

----

Since the ECB can now retroactively change any bond contract to whatever it likes and with any nation in its dominion then the valuation of European sovereign debt must be re-examined for what it really is which is no longer what anyone previously thought.

Starkly put; the bonds issued by the sovereign nations in Europe are no longer pari passu, on equal footing, with the bonds issued in the United States.

We have just passed a clearly defined “break point” where the legal rules were changed to the great disadvantage of all the private debt holders.

The risk of ownership of European sovereign debt is now infinitely more dangerous in my estimation than it was last week.

We still do not know if the IMF will demand and receive the same special treatment but I assert that it no longer matters.

The actions of the European Central Bank are all that was necessary to radically alter the value of European sovereign debt and it is just not me but any number of large financial institutions that are in shock given what has happened with one of the largest and most respected bond investors in the world telling me that “financial repression is the softer word for it.”