American Banks helped the Greeks swindle the EU

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American Banks helped the Greeks swindle the EU

Post by Thanas » 2010-02-14 07:26am

Der Spiegel
Goldman Sachs helped the Greek government to mask the true extent of its deficit with the help of a derivatives deal that legally circumvented the EU Maastricht deficit rules. At some point the so-called cross currency swaps will mature, and swell the country's already bloated deficit.

Greeks aren't very welcome in the Rue Alphones Weicker in Luxembourg. It's home to Eurostat, the European Union's statistical office. The number crunchers there are deeply annoyed with Athens. Investigative reports state that important data "cannot be confirmed" or has been requested but "not received."

Creative accounting took priority when it came to totting up government debt.Since 1999, the Maastricht rules threaten to slap hefty fines on euro member countries that exceed the budget deficit limit of three percent of gross domestic product. Total government debt mustn't exceed 60 percent.

The Greeks have never managed to stick to the 60 percent debt limit, and they only adhered to the three percent deficit ceiling with the help of blatant balance sheet cosmetics. One time, gigantic military expenditures were left out, and another time billions in hospital debt. After recalculating the figures, the experts at Eurostat consistently came up with the same results: In truth, the deficit each year has been far greater than the three percent limit. In 2009, it exploded to over 12 percent.

Now, though, it looks like the Greek figure jugglers have been even more brazen than was previously thought. "Around 2002 in particular, various investment banks offered complex financial products with which governments could push part of their liabilities into the future," one insider recalled, adding that Mediterranean countries had snapped up such products.

Greece's debt managers agreed a huge deal with the savvy bankers of US investment bank Goldman Sachs at the start of 2002. The deal involved so-called cross-currency swaps in which government debt issued in dollars and yen was swapped for euro debt for a certain period -- to be exchanged back into the original currencies at a later date.

Fictional Exchange Rates

Such transactions are part of normal government refinancing. Europe's governments obtain funds from investors around the world by issuing bonds in yen, dollar or Swiss francs. But they need euros to pay their daily bills. Years later the bonds are repaid in the original foreign denominations.

But in the Greek case the US bankers devised a special kind of swap with fictional exchange rates. That enabled Greece to receive a far higher sum than the actual euro market value of 10 billion dollars or yen. In that way Goldman Sachs secretly arranged additional credit of up to $1 billion for the Greeks.

This credit disguised as a swap didn't show up in the Greek debt statistics. Eurostat's reporting rules don't comprehensively record transactions involving financial derivatives. "The Maastricht rules can be circumvented quite legally through swaps," says a German derivatives dealer.

In previous years, Italy used a similar trick to mask its true debt with the help of a different US bank. In 2002 the Greek deficit amounted to 1.2 percent of GDP. After Eurostat reviewed the data in September 2004, the ratio had to be revised up to 3.7 percent. According to today's records, it stands at 5.2 percent.

At some point Greece will have to pay up for its swap transactions, and that will impact its deficit. The bond maturities range between 10 and 15 years. Goldman Sachs charged a hefty commission for the deal and sold the swaps on to a Greek bank in 2005.

The bank declined to comment on the controversial deal. The Greek Finance Ministry did not respond to a written request for comment.
What is even more galling is that today, german news radio revealed that Goldman Sachs had tried to pressure Greece into accepting another of those deals just the day before Greece admitted the whole sham to the EU.
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Re: American Banks helped the Greeks swindle the EU

Post by Kane Starkiller » 2010-02-14 07:59am

Getting focused on Goldman Sachs is like blaming your wife's lover. Sure the first impulse is to beat him up but it's your wife that really betrayed you. He never promised to be loyal to you.
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Re: American Banks helped the Greeks swindle the EU

Post by Fingolfin_Noldor » 2010-02-14 08:05am

Kane Starkiller wrote:Getting focused on Goldman Sachs is like blaming your wife's lover. Sure the first impulse is to beat him up but it's your wife that really betrayed you. He never promised to be loyal to you.
Doesn't change the idea of a public menance though. If something is going to be a public menance, it ought to be gotten rid of, no?
Last edited by Fingolfin_Noldor on 2010-02-14 08:06am, edited 1 time in total.
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Re: American Banks helped the Greeks swindle the EU

Post by Thanas » 2010-02-14 08:06am

^This analogy is applicable how....?
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Re: American Banks helped the Greeks swindle the EU

Post by Kane Starkiller » 2010-02-14 08:19am

It's applicable because Goldman Sachs, like your wife's lover, while not nice didn't actually break any laws or breached any agreements. The Greek government did. Therefore the responsibility lies primarily with the Greek government.
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Re: American Banks helped the Greeks swindle the EU

Post by Fingolfin_Noldor » 2010-02-14 08:29am

Kane Starkiller wrote:It's applicable because Goldman Sachs, like your wife's lover, while not nice didn't actually break any laws or breached any agreements. The Greek government did. Therefore the responsibility lies primarily with the Greek government.
Well, by that analogy, a criminal accomplice shouldn't be charged for a crime. And just because there aren't EU laws governing government credibility, doesn't preclude their responsibility in this mess. In many countries, cooking the books is a chargeable offence.

Plus, I would bet Goldman Sachs stood to profit from even the crisis.
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Re: American Banks helped the Greeks swindle the EU

Post by Thanas » 2010-02-14 08:32am

I think Kane Starkiller is once more confusing legality with morality. All this does is reaffirm my view that there is something really shifty going on in this world if it is considered okay for a bank to help drive a country into bankruptcy which also pretty much screws a lot of other countries as well.
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Re: American Banks helped the Greeks swindle the EU

Post by Kane Starkiller » 2010-02-14 08:45am

That is why 14 year olds are not allowed to do business with the banks without supervision: we don't trust them to behave responsibly and we don't trust the banks to be responsible for them. A government, on the other hand, is expected to honor its obligation it agreed upon with other sovereign countries and act responsibly. Like not getting into a debt over its head. If government is willing to cook its own numbers should a foreign bank then worry about the real state of its economy? I think that goes a little above and beyond its call of duty even if we focus only on "morality".
Is Goldman Sachs legally or morally obligated to study every single agreement sovereign country of Greece entered into and then explain to the government that it can't do something like it was dealing with a child?
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Re: American Banks helped the Greeks swindle the EU

Post by Teleros » 2010-02-14 08:52am

Thanas wrote:All this does is reaffirm my view that there is something really shifty going on in this world if it is considered okay for a bank to help drive a country into bankruptcy which also pretty much screws a lot of other countries as well.
Obviously it's not considered "okay" for this except by some people at Goldman Sachs and presumably the Greek government. I'm just not surprised: you've taken a group of very smart men and women, promised them bucketloads of money if they make big profits for your company, and then have mere elected politicians trying to somehow limit their ability to do so. Of course they're going to be good at exploiting any loopholes the politicians leave for them.

As for the Greek government... much of the problem as I understand it comes with trying to remain within the Eurozone rules. Arguably that's the heart of the problem - Greece has signed up to something it has no intention of realistically honouring, hence the need for various dodgy deals.

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Re: American Banks helped the Greeks swindle the EU

Post by Thanas » 2010-02-14 09:02am

Kane Starkiller wrote:That is why 14 year olds are not allowed to do business with the banks without supervision: we don't trust them to behave responsibly and we don't trust the banks to be responsible for them. A government, on the other hand, is expected to honor its obligation it agreed upon with other sovereign countries and act responsibly. Like not getting into a debt over its head. If government is willing to cook its own numbers should a foreign bank then worry about the real state of its economy? I think that goes a little above and beyond its call of duty even if we focus only on "morality".
Oh please. Are you so thick that you do think purposefully inventing and then selling a method to circumvent the rules is moral and a-ok? If so, I think you need to rethink your definition of morality.
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Re: American Banks helped the Greeks swindle the EU

Post by aerius » 2010-02-14 10:36am

Kane Starkiller wrote:A government, on the other hand, is expected to honor its obligation it agreed upon with other sovereign countries and act responsibly. Like not getting into a debt over its head. If government is willing to cook its own numbers should a foreign bank then worry about the real state of its economy? I think that goes a little above and beyond its call of duty even if we focus only on "morality".
Is Goldman Sachs legally or morally obligated to study every single agreement sovereign country of Greece entered into and then explain to the government that it can't do something like it was dealing with a child?
Yes. If I walked into a bank and tried to deposit $200k in non-sequential bills in a large shopping bag, I'm going to be detained by security and the forensic accountants will be crawling all over my ass to find out where the fucking money came from. If I suddenly had $1 million wired into my account from overseas, the bank, the police, Revenue Canada and possibly CSIS will all be giving me the full treatment to ensure that the money is kosher. Same thing if I tried to wire a fat wad of money overseas or transfer a ton of money from one of my accounts to another of my accounts, the banks and FINTRAC will want some answers.
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Re: American Banks helped the Greeks swindle the EU

Post by Kane Starkiller » 2010-02-14 12:10pm

Thanas wrote:Oh please. Are you so thick that you do think purposefully inventing and then selling a method to circumvent the rules is moral and a-ok? If so, I think you need to rethink your definition of morality.
It's no more a-ok than fucking other man's wife. Does that mean the other guy should first demand proof from a woman that she is not married? How would you even legislate this? All the Goldman Sachs employee must say is that he didn't know. No one said they are nice guys. But being a greedy asshole is one thing, breaking your written agreements is quite another.
aerius wrote:Yes. If I walked into a bank and tried to deposit $200k in non-sequential bills in a large shopping bag, I'm going to be detained by security and the forensic accountants will be crawling all over my ass to find out where the fucking money came from. If I suddenly had $1 million wired into my account from overseas, the bank, the police, Revenue Canada and possibly CSIS will all be giving me the full treatment to ensure that the money is kosher. Same thing if I tried to wire a fat wad of money overseas or transfer a ton of money from one of my accounts to another of my accounts, the banks and FINTRAC will want some answers.
Checking whether your money is stolen (if you try to deposit an unusual amount of cash for an average individual which is not what Greek government tried to do) is not the same as checking whether you have any private contracts with other individuals over what kind of business you can do with a bank. Many contracts between individuals or states can be secret. How is a bank supposed to check that?
Greece never stole any money. It simply indebted itself more than an agreement with a third party would allow.
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Re: American Banks helped the Greeks swindle the EU

Post by Thanas » 2010-02-14 12:16pm

Starkiller, get this thing through your head:

Goldman Sachs invented the method to cheat the EU. They did it, they sold it, they got paid for it. Your analogy fells flat because they knew about it and when greece wanted to come clean, they tried to sell them another of those deals to avoid the greeks coming clean. Either address this point instead of continually refusing to do so or be quiet while the adults talk.
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Re: American Banks helped the Greeks swindle the EU

Post by Fingolfin_Noldor » 2010-02-14 12:25pm

Kane Starkiller wrote:
Thanas wrote:Oh please. Are you so thick that you do think purposefully inventing and then selling a method to circumvent the rules is moral and a-ok? If so, I think you need to rethink your definition of morality.
It's no more a-ok than fucking other man's wife. Does that mean the other guy should first demand proof from a woman that she is not married? How would you even legislate this? All the Goldman Sachs employee must say is that he didn't know. No one said they are nice guys. But being a greedy asshole is one thing, breaking your written agreements is quite another.
You are misrepresenting an issue. If an auditor was found to be colluding with his or her client to misrepresent figures to say the SEC or some other regulatory body, the auditor is also liable for this illegal act.

By your argument, the auditor has done nothing wrong, beyond selling the method of the crime. If that doesn't sound wrong to you, then you are an idiot.
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Re: American Banks helped the Greeks swindle the EU

Post by K. A. Pital » 2010-02-14 12:52pm

Kane: "But in the Greek case the US bankers devised a special kind of swap with fictional exchange rates."
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Re: American Banks helped the Greeks swindle the EU

Post by Kane Starkiller » 2010-02-14 02:31pm

Thanas wrote:Starkiller, get this thing through your head:

Goldman Sachs invented the method to cheat the EU. They did it, they sold it, they got paid for it. Your analogy fells flat because they knew about it and when greece wanted to come clean, they tried to sell them another of those deals to avoid the greeks coming clean. Either address this point instead of continually refusing to do so or be quiet while the adults talk.
Let's be clear what we are talking about here: Greeks got a credit from Goldman Sachs. This is nothing inherently criminal. The difference was that the Greeks wanted to hide the fact that the bank gave them credit not because there was something inherently criminal about getting a credit but because they didn't want EU to know because of an agreement between EU and Greece to which Goldman Sachs was not a party to.
Goldman Sachs didn't cheat EU since Goldman Sachs didn't sign any agreement over how much money it can lend to Greece any more a random guy has signed a contract he won't screw another man's wife.
"Greece budget deficit as a percentage of GDP must be below 3%" is not some kind of international law that is automatically binding to any and all foreign companies.

Now, from my very first post I likened Goldman Sachs to a guy sleeping with a married woman therefore obviously I didn't think the bank was actually morally perfectly in the right.
However if Greek government comes to the bank and says "I want a credit from you but could you make it so that the rest of the world doesn't know" is the bank morally obligated to investigate reasons and read through the Maastricht treaty and any other treaty Greeks ever signed or should they simply respect client privacy? Didn't EU parliament disallow the Americans to scour banking data in search for terrorists in the name of privacy just a few days ago? I have no doubt that there were certain officials in Goldman Sachs who were "in the know" but that means nothing. Greek government violated the agreement therefore they should bear the responsibility and in the future should be made to allow EU officials greater scrutiny of their dealings. If they want to be a part of Eurozone that is.
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Re: American Banks helped the Greeks swindle the EU

Post by Thanas » 2010-02-14 02:39pm

I have no wish to restate my argument once again since you have not addressed it, but apparently you are one of the children who had a bad education and lack reading comprehension:

Do you agree that what Goldman Sachs did was morally reprehensible and that it is a bad thing to enable governements to swindle their international partners if it has that much of an impact on other states? Do you also agree that it is a bad thing to design a practice that has the only purpose of swindling those partners?

You still seem to be arguing legality. So now, please answer the point.
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Re: American Banks helped the Greeks swindle the EU

Post by Kane Starkiller » 2010-02-14 02:48pm

Thanas wrote:I have no wish to restate my argument once again since you have not addressed it, but apparently you are one of the children who had a bad education and lack reading comprehension:

Do you agree that what Goldman Sachs did was morally reprehensible and that it is a bad thing to enable governements to swindle their international partners if it has that much of an impact on other states? Do you also agree that it is a bad thing to design a practice that has the only purpose of swindling those partners?

You still seem to be arguing legality. So now, please answer the point.
My first post in this thread:
Kane Starkiller wrote:Getting focused on Goldman Sachs is like blaming your wife's lover. Sure the first impulse is to beat him up but it's your wife that really betrayed you. He never promised to be loyal to you.
Speaking of reading comprehension.
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Re: American Banks helped the Greeks swindle the EU

Post by Thanas » 2010-02-14 02:51pm

Quit evading and start answering, because that post was immediately followed up with legalistic nonsense. So finally answer the point.
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Re: American Banks helped the Greeks swindle the EU

Post by Kane Starkiller » 2010-02-14 02:55pm

You first claimed the analogy was not appropriate then you dropped that argument and then claimed I claimed that the actions of the bank were moral which I never did. In other words you keep putting words in my mouth.
Depending on how much the bank knew it is more or less moral (similar to whether a guy actually knows whether the woman is married) but the main point is that the primary guilty party and the one in breach of contract is Greece therefore legally and morally Greece is responsible.
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Re: American Banks helped the Greeks swindle the EU

Post by Thanas » 2010-02-14 03:03pm

Kane Starkiller wrote:You first claimed the analogy was not appropriate then you dropped that argument
I did not drop it because you were operating under false pretenses, all the while claiming that the bank did not know anything. RTFA.
and then claimed I claimed that the actions of the bank were moral which I never did. In other words you keep putting words in my mouth.
Depending on how much the bank knew it is more or less moral (similar to whether a guy actually knows whether the woman is married)
RTFA. You know, Stas even quoted the part to you. And if you would actually read the freaking article (you know, this is why I made a crack about reading comprehension) you would know that the bank knew about this.
but the main point is that the primary guilty party and the one in breach of contract is Greece therefore legally and morally Greece is responsible.
Apparently, the question of shared moral responsibility does not enter your brain. Heck, nobody is denying greece is culpable. The point is that the behaviour of the bank was reprehensible. If you deny that, make a goddam argument. Otherwise shut up and let the adults talk.
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Re: American Banks helped the Greeks swindle the EU

Post by aerius » 2010-02-14 03:21pm

Kane Starkiller wrote:Let's be clear what we are talking about here: Greeks got a credit from Goldman Sachs. This is nothing inherently criminal. The difference was that the Greeks wanted to hide the fact that the bank gave them credit not because there was something inherently criminal about getting a credit but because they didn't want EU to know because of an agreement between EU and Greece to which Goldman Sachs was not a party to.
Goldman Sachs didn't cheat EU since Goldman Sachs didn't sign any agreement over how much money it can lend to Greece any more a random guy has signed a contract he won't screw another man's wife.
"Greece budget deficit as a percentage of GDP must be below 3%" is not some kind of international law that is automatically binding to any and all foreign companies.
I want to put a fat wad of cash into a Swiss bank, this is 100% legal. But I'm doing it because I don't want to pay taxes on the interest I'm getting off that money. The Swiss bank isn't doing anything wrong by taking my deposit without doing some kind of background financial check on me, it's not their moral responsibility. Oh, wait, that's why UBS got the shit sued out of them.
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Re: American Banks helped the Greeks swindle the EU

Post by Kane Starkiller » 2010-02-14 03:33pm

Thanas wrote:I did not drop it because you were operating under false pretenses, all the while claiming that the bank did not know anything. RTFA.
When did I categorically say Goldman Sachs didn't know? Quote me. Again how does my analogy( Greece-cheating wife, Goldman Sachs-wife's lover) indicate that I claimed Goldman Sachs didn't know? Again you are putting words in my mouth.
Thanas wrote:Apparently, the question of shared moral responsibility does not enter your brain. Heck, nobody is denying greece is culpable. The point is that the behaviour of the bank was reprehensible. If you deny that, make a goddam argument. Otherwise shut up and let the adults talk.
So you are saying that this thread is only for discussion of Goldman Sachs and more general comments about Greece's behaviour and the real roots of the problem are not allowed? If that is the case then I derailed the thread and won't continue.
However since there isn't any thread about general Greek crisis I assumed that more general comments would be allowed.
My initial analogy about cheating wife was obviously not intended to claim that the lover (bank) is clean merely that it shouldn't be the focus. Trust between the wife (Greece) and husband(EU) has been broken. The lover might be Goldman Sachs today or another Chinese or Japanese bank tomorrow. Therefore the main issue is the relationship between Greece and EU, whether Greece should be "divorced/kicked out of Eurozone" or bailed out and put under much greater scrutiny.
aerius wrote:I want to put a fat wad of cash into a Swiss bank, this is 100% legal. But I'm doing it because I don't want to pay taxes on the interest I'm getting off that money. The Swiss bank isn't doing anything wrong by taking my deposit without doing some kind of background financial check on me, it's not their moral responsibility. Oh, wait, that's why UBS got the shit sued out of them.
The US sued them because they wouldn't release their names. No one said UBS had to actually do its own research and catch tax evaders by itself. Also I would say that being a suspected tax evader is still better than being a suspected terrorist. Yet EU parliament refused US access to SWIFT databases a few days ago in the name of privacy. So was Swiss cavein a result of moral right on the part of US or simply the fact that EU can't be pressured as easily as small Switzerland.
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Re: American Banks helped the Greeks swindle the EU

Post by Thanas » 2010-02-14 03:52pm

Kane Starkiller wrote:
Thanas wrote:I did not drop it because you were operating under false pretenses, all the while claiming that the bank did not know anything. RTFA.
When did I categorically say Goldman Sachs didn't know? Quote me. Again how does my analogy( Greece-cheating wife, Goldman Sachs-wife's lover) indicate that I claimed Goldman Sachs didn't know? Again you are putting words in my mouth.
All through this thread you continued this slippery argument, talking about "what if they say they did not know" or "Does that mean the other guy should first demand proof from a woman that she is not married?"

Fuck off. You first pretended to liken Goldman sachs to a lover of a married woman. Which is not applicable here. (It would be if the lover would come to the wife and say "I know you are married, but I got a nice little house here where we can meet and have sex", but then again, you never claimed that, did you?)
So you are saying that this thread is only for discussion of Goldman Sachs and more general comments about Greece's behaviour and the real roots of the problem are not allowed? If that is the case then I derailed the thread and won't continue.
However since there isn't any thread about general Greek crisis I assumed that more general comments would be allowed.
Start your own thread, quit derailing mine. Stupid idiot.

My initial analogy about cheating wife was obviously not intended to claim that the lover (bank) is clean merely that it shouldn't be the focus.
And nobody said otherwise, so once more you are attacking imaginary points. And the EU should investigate if they can get Goldman Sachs on the hook for something, merely because they apparently came up with the whole exact details of the scheme.
Trust between the wife (Greece) and husband(EU) has been broken. The lover might be Goldman Sachs today or another Chinese or Japanese bank tomorrow. Therefore the main issue is the relationship between Greece and EU, whether Greece should be "divorced/kicked out of Eurozone" or bailed out and put under much greater scrutiny.
Which is not the subject of this thread, you idiot. So far you have exhibited quite the stellar reading comprehension problem. But hey, what else can be expected of you, you have shown yourself to be an utter failure at any kind of intelligent thinking before, so once more, we have got another famous "Kane Starkiller misses the point" thread. Numbnuts.
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Re: American Banks helped the Greeks swindle the EU

Post by Kane Starkiller » 2010-02-14 04:12pm

Thanas wrote:All through this thread you continued this slippery argument, talking about "what if they say they did not know" or "Does that mean the other guy should first demand proof from a woman that she is not married?"

Fuck off. You first pretended to liken Goldman sachs to a lover of a married woman. Which is not applicable here. (It would be if the lover would come to the wife and say "I know you are married, but I got a nice little house here where we can meet and have sex", but then again, you never claimed that, did you?)
"Slippery" argument is actually you desperately putting words in my mouth. I never went into detail of what the lover knows because it isn't important: the wife cheated that's what matters.
We don't know whether bank knew (article saying so is not evidence accepted in courts last I checked) and even if it did Greece was primary offender.
Thanas wrote:Start your own thread, quit derailing mine. Stupid idiot.
My post was relatively small. You latched on to the whole "you claimed the bank is moral" thing and expanded this.
Thanas wrote:And nobody said otherwise, so once more you are attacking imaginary points. And the EU should investigate if they can get Goldman Sachs on the hook for something, merely because they apparently came up with the whole exact details of the scheme.
I wasn't aware that my initial comment was attacking anyone. It was more of a general comment that the Greece is the primary culprit and the primary problem for EU rather than some foreign bank. I don't see how that is completely off topic.
Thanas wrote:Which is not the subject of this thread, you idiot. So far you have exhibited quite the stellar reading comprehension problem. But hey, what else can be expected of you, you have shown yourself to be an utter failure at any kind of intelligent thinking before, so once more, we have got another famous "Kane Starkiller misses the point" thread. Numbnuts.
Actually it's yet another "Kane Starkiller obliterates every single Thanas' point until he starts screaming and hurling insults with less and less substance until Kane Starkiller gets bored and leaves leaving Thanas butthurt and itching for a conflict in some future topic" thread.
But if the forces of evil should rise again, to cast a shadow on the heart of the city.
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