Controlled vs Uncontrolled Defaults

Paul Mason:

If I borrow £1,000 from you and then, because of spectacular bad luck cannot pay it back, but I come to you and say, “here is £750, can we call it quits?” – that is a controlled default.

If I borrow £1,000 from you and you ring me up and you get directory inquiries in the Dominican Republic – that is an uncontrolled default.

Right now, Greece’s fate hangs in the balance somewhere between these two.

More here via BBC News – What might a Greek default look like?.


  1. Definition of Chinese Curse: "may you live in interesting times"
    Definition of Interesting TImes: "see today's date and 5 years forward"

    can u imagine if greece leaves the euro? poor italy and spain will be like…"what! no 'get out of debt free coupon' for us?" and what of the remaining rump euro states? the creditors to greece will still want to be paid in their contractual "euro" and NOT "nouveau drachma"! these creditors will just pursue the rump (likely germany netherland france) for their euro anyway (via the rump ECB/BIS).

    so if greece leaves, they ALL have to leave in my opinion. which means germany & france can kiss smooth exports earnings goodbye for the short to intermediate term anyway. (no wonder merkel and sarkozy stay the tightrope course).

    can u imagine, citizens of their respective countries queuing in front of their respective banks to tender the newly worthless euro for their national currency…and at what rates? and what's the price of bread tomorrow? the lawyers will be poring over the original statutory blended rates which put the frankenstein euro together: quarter part deutsche mark, one third fr franc, one eighth peseta, etc etc. It will make US MBS litigation look like nursery rhyme practice.

    and then what of the "illicit" undeclared euro? fat chance that will be put into banks! no that money will "fly" well before time is called. Isn't that why the swiss are ready to pull out their knives regarding the swissie already?

    and then there are the bankers ever of sound mind, and always sleeping well at night, who are "playing" this through (here we go again) CDS, using a boilerplate one termsheet fits all commoditized definition of "default".