History is being Made

S&P today downgraded Greece debt to CCC. The lowest rate of any country in the world. S&P anticipates default.

The new plan that involves private creditors would in effect take away a vast amount of pension money from many people worldwide. There is a vast unknown of what will happen with a Greek default. For sure there would be dire results in the U.S. as Obama stated Tuesday at the White House with Merkel by his side.

In the US the Treasury has in effect shorted their own bonds. How you may say? The gimmick to get around the debt limit included borrowing all the Treasuries held in Federal employee 401ks and selling them to raise money. They will then have to buy them back. That is short selling. The short seller hopes that the securities go down in value. With QE2 ending we can expect Treasuries yields to increase which means that the market value of the bonds goes down.

Greek 2 year bonds with a face of 100 are selling today at just under 26. It will not just be a haircut that the banks and pension funds will get it will be a shaved head and maybe a slit throat.

The banks in the US hold $4 trillion in Treasuries. Can you imagine if they lost 75% of that value? By the announcement of getting out of Treasuries it means that the world will be safe for the banks (including of course Goldman Sachs and George Soros.) The suckers in pension plans, I mean hard-working Americans,  will be the losers.

History of the U.S. is being made in Greece right now.