When a Default Is Not a Default

Friday, March 2, 2012, 2:48 PM
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The definition of a default is quite clear, and very simple.

Definition:  Default – n. Failure to meet a financial obligation.

Here’s the deal with Greece. The holders of outstanding bonds are being asked to swap those high-interest bonds for new bonds that have a face value of 50% of the old ones, and an interest rate of just 4%.

Because the private investors in these bonds are being asked to agree to these conditions, the argument is that there is no default because everybody ‘voluntarily’ agreed to the deal. Well, not everybody is voluntarily agreeing to the deal, especially those who hold the CDS paper against those bonds who would like to be paid for what is obviously a default by any other name.


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