Results 1 to 30 of 2454

Thread: Euro Area

Hybrid View

Previous Post Previous Post   Next Post Next Post
  1. #1
    Senior Member Senior Member gaelic cowboy's Avatar
    Join Date
    Sep 2003
    Location
    mayo
    Posts
    4,833

    Default Re: The continuing battle against the inevitable Euro area default

    Quote Originally Posted by Kralizec View Post
    1) some other countries got into trouble when they started bailing out their banks. Are you saying they should have just let the banks gone bust? Or that they should have bailed them out and then defaulted on those debts? Because the latter would have ruined not just the governments credibility but also that of its respective financial sector
    2) if a country defaults, it screws over a string of banks, pension funds and governments in other EU countries. I can see how this would be beneficial to the defaulting country in the short run, but why should the rest stand for this behaviour?
    3) just speculation: let's say a country has about 100% GDP sovereign debt, and it defaults on half of it. If that causes the interest rates at which they can refinance their remaining debt to double or tripple, how is that country any better off? If a country defaults on all of its debt, can it manage to run a positive budget for the next couple of decades? Because a lot of people will be pissed, and simply not lend at all.
    Q1 Bailing banks has been forced on people because everyones respective central bank has been against any form of restrucure or default from the start. This policy was based on much of the thinking you yourself profess about market sentiment turning bad due to investor losses blah balh and frankly it's a lod of cobblesrs and neither is it working and in fact is getting worse. We have seen where this policy has led us and to continue it now for Spain and Italy will be suicide both for the Euro the EU and the world economy.

    Q2 So what your saying is that you prefer to reward bad investment strategies by private corporations and individuals by taking money from taxpayers etc etc. Therefore you want to increase the debt burden on the sovereign by making it liable for bank losses which increases the amount need to be borrowed for bailouts and as a result deflates said economy which increase the debt burden. This cycle needs to be broken or it will break us all.

    Q3 Because there is less burden on the sovereign to borrow to refinance existing loans and because much of the reticence in the bondmarket is due to the need to refinance and the fear of restructuring. The markets have no memory they only care about returns and they will lend if they feel there is one available.

    I'm confident if Ireland gets to cancel much of it's bank debt then it's bond rates will actually go down and facilitate a return to market funding in 2013 as envisaged all along by the Troika. Every paper released by every investment bank/hedge fund/financial blah blah says the same thing Ireland must restructure it's bank debt ie to effectively not pay it back. The continual burden on taxpayers of Ireland to pay back the bailout money merely increase the cost of the debt making it harder to exit the programme.

    I believe Portugal could get a simmilar bounce depending on the situation in Spain but unfortunately it appears Spain is as we speak paying more for it bonds. If Spain is paying more it probably means that the proposed spanish bank deal is nothing of the sort and is actually a bailout of the sovereign.
    Last edited by gaelic cowboy; 07-19-2012 at 13:32.
    They slew him with poison afaid to meet him with the steel
    a gallant son of eireann was Owen Roe o'Neill.

    Internet is a bad place for info Gaelic Cowboy

  2. #2
    master of the pwniverse Member Fragony's Avatar
    Join Date
    Apr 2003
    Location
    The EUSSR
    Posts
    30,680

    Default Re: The continuing battle against the inevitable Euro area default

    I am probably stupid for asking, especially because I'm asking it, but what exactly is a 'default'. It was never explained to me in a way I can understand

  3. #3
    Darkside Medic Senior Member rory_20_uk's Avatar
    Join Date
    Mar 2003
    Location
    Taplow, UK
    Posts
    8,690
    Blog Entries
    1

    Default Re: The continuing battle against the inevitable Euro area default

    At its most simplest the monies owed are not paid.

    An enemy that wishes to die for their country is the best sort to face - you both have the same aim in mind.
    Science flies you to the moon, religion flies you into buildings.
    "If you can't trust the local kleptocrat whom you installed by force and prop up with billions of annual dollars, who can you trust?" Lemur
    If you're not a liberal when you're 25, you have no heart. If you're not a conservative by the time you're 35, you have no brain.
    The best argument against democracy is a five minute talk with the average voter. Winston Churchill

  4. #4

    Default Re: The continuing battle against the inevitable Euro area default

    Just popping in here to ask real quickly, are we still boned?


  5. #5
    Voluntary Suspension Voluntary Suspension Philippus Flavius Homovallumus's Avatar
    Join Date
    May 2005
    Location
    Isca
    Posts
    13,477

    Default Re: The continuing battle against the inevitable Euro area default

    Quote Originally Posted by a completely inoffensive name View Post
    Just popping in here to ask real quickly, are we still boned?

    Yes.
    "If it wears trousers generally I don't pay attention."

    [IMG]https://img197.imageshack.us/img197/4917/logoromans23pd.jpg[/IMG]

  6. #6
    Sovereign Oppressor Member TIE Fighter Shooter Champion, Turkey Shoot Champion, Juggler Champion Kralizec's Avatar
    Join Date
    Mar 2005
    Location
    Netherlands
    Posts
    5,812

    Default Re: The continuing battle against the inevitable Euro area default

    Quote Originally Posted by gaelic cowboy View Post
    Q1 Bailing banks has been forced on people because everyones respective central bank has been against any form of restrucure or default from the start. This policy was based on much of the thinking you yourself profess about market sentiment turning bad due to investor losses blah balh and frankly it's a lod of cobblesrs and neither is it working and in fact is getting worse. We have seen where this policy has led us and to continue it now for Spain and Italy will be suicide both for the Euro the EU and the world economy.

    Q2 So what your saying is that you prefer to reward bad investment strategies by private corporations and individuals by taking money from taxpayers etc etc. Therefore you want to increase the debt burden on the sovereign by making it liable for bank losses which increases the amount need to be borrowed for bailouts and as a result deflates said economy which increase the debt burden. This cycle needs to be broken or it will break us all.
    Unilaterally erasing your banks' debt is quite illegal per EU law. As the effects of that, or a default on sovereign debt for that matter, will dramatically affect financial institutions and pension funds in other countries it's not surprising that those other countries won't look kindly on such a move.

    Bad investment strategies? Maybe. "We're defaulting on our debt. Don't like it? Then you shouldn't have invested in us in the first place. What were you thinking, lolz."

    It's not just an abstract matter of "reduced confidence" but also a direct matter of reduced money supply when (other) banks have to write off a huge amount of assets. You could make the case that there should be a EU wide restructuring of debt, but that will disproportionately reward those countries who either made a mess out of it themselves or countries who enjoyed the benefits of large financial sectors for many years.

    Q3 Because there is less burden on the sovereign to borrow to refinance existing loans and because much of the reticence in the bondmarket is due to the need to refinance and the fear of restructuring. The markets have no memory they only care about returns and they will lend if they feel there is one available.
    Fair enough. A sovereign default is not necessarily an armageddon, and restructuring/defaulting will actually make it easier to repay the remainder of the debt. But if a country defaults at a time when there's still actually hope that it could repay debt it sets a poor precedent.

  7. #7
    Senior Member Senior Member gaelic cowboy's Avatar
    Join Date
    Sep 2003
    Location
    mayo
    Posts
    4,833

    Default Re: The continuing battle against the inevitable Euro area default

    Quote Originally Posted by Kralizec View Post
    Unilaterally erasing your banks' debt is quite illegal per EU law. As the effects of that, or a default on sovereign debt for that matter, will dramatically affect financial institutions and pension funds in other countries it's not surprising that those other countries won't look kindly on such a move.

    Bad investment strategies? Maybe. "We're defaulting on our debt. Don't like it? Then you shouldn't have invested in us in the first place. What were you thinking, lolz."

    It's not just an abstract matter of "reduced confidence" but also a direct matter of reduced money supply when (other) banks have to write off a huge amount of assets. You could make the case that there should be a EU wide restructuring of debt, but that will disproportionately reward those countries who either made a mess out of it themselves or countries who enjoyed the benefits of large financial sectors for many years.



    Fair enough. A sovereign default is not necessarily an armageddon, and restructuring/defaulting will actually make it easier to repay the remainder of the debt. But if a country defaults at a time when there's still actually hope that it could repay debt it sets a poor precedent.

    You still don't get it even after all this time yer all still worried what others will think of the default. The high bond prices for Spain and Ireland are there as a result of a belief among lenders that sovereigns will deflate there economy because of the terms of the bailout. Ireland's bonds should be lower as we don't have to borrow money cos we have a bailout that means anyone with short term paper is guaranteed there money back, so why do they soar they go up because we require more and more to service an ever larger debt because of the bailout.

    Spain is Ireland on steroids if ye all try the same trick again as ye did here the Euro will suffer it's biggest crisis yet and it wont have anything to do with Greece.


    And honestly what financial institution would hold such paper when Merkels 2013 deadline for haircuts is coming up, this stuff has all been marked down or sold at a loss ages ago.

    If you dont restructure the debt you will end up down here in the mud with us I suggest you mark it down and at least get something for it.
    Last edited by gaelic cowboy; 07-21-2012 at 11:14.
    They slew him with poison afaid to meet him with the steel
    a gallant son of eireann was Owen Roe o'Neill.

    Internet is a bad place for info Gaelic Cowboy

  8. #8
    Sovereign Oppressor Member TIE Fighter Shooter Champion, Turkey Shoot Champion, Juggler Champion Kralizec's Avatar
    Join Date
    Mar 2005
    Location
    Netherlands
    Posts
    5,812

    Default Re: The continuing battle against the inevitable Euro area default

    You do have a knack for selectively picking things that support your argument, don't you?

    Debt rates are high for the simple reason that nobody wants to buy those bonds. Germany's finances are good but not that good; the near-zero rates they get now are because everybody piles on eachother to buy that paper and thus create a self-reinforcing prophesy. Spain and Italy are in trouble, but because nobody buys their bonds it paints a bleaker picture than is actually justified.

    German and French banks hold massive stakes in Spanish debt. Erasing that debt means letting Spain off the hook at the expense of France and Germany. Is that difficult to comprehend?

    The banking union sounds like a good idea that's long overdue.

  9. #9
    Voluntary Suspension Voluntary Suspension Philippus Flavius Homovallumus's Avatar
    Join Date
    May 2005
    Location
    Isca
    Posts
    13,477

    Default Re: The continuing battle against the inevitable Euro area default

    Quote Originally Posted by Kralizec View Post
    You do have a knack for selectively picking things that support your argument, don't you?

    Debt rates are high for the simple reason that nobody wants to buy those bonds. Germany's finances are good but not that good; the near-zero rates they get now are because everybody piles on eachother to buy that paper and thus create a self-reinforcing prophesy. Spain and Italy are in trouble, but because nobody buys their bonds it paints a bleaker picture than is actually justified.

    German and French banks hold massive stakes in Spanish debt. Erasing that debt means letting Spain off the hook at the expense of France and Germany. Is that difficult to comprehend?

    The banking union sounds like a good idea that's long overdue.
    Spain's bond yields are over 7% right now - I suggest you boys find a new solution, because the medicine you're using isn't killing the patient so much as putrifying his corpse right now.
    "If it wears trousers generally I don't pay attention."

    [IMG]https://img197.imageshack.us/img197/4917/logoromans23pd.jpg[/IMG]

  10. #10
    Senior Member Senior Member gaelic cowboy's Avatar
    Join Date
    Sep 2003
    Location
    mayo
    Posts
    4,833

    Default Re: The continuing battle against the inevitable Euro area default

    Quote Originally Posted by Kralizec View Post
    You do have a knack for selectively picking things that support your argument, don't you?

    Debt rates are high for the simple reason that nobody wants to buy those bonds. Germany's finances are good but not that good; the near-zero rates they get now are because everybody piles on eachother to buy that paper and thus create a self-reinforcing prophesy. Spain and Italy are in trouble, but because nobody buys their bonds it paints a bleaker picture than is actually justified.

    German and French banks hold massive stakes in Spanish debt. Erasing that debt means letting Spain off the hook at the expense of France and Germany. Is that difficult to comprehend?

    The banking union sounds like a good idea that's long overdue.
    If there guaraunteed there money on short term paper why are they going up then these people only care about returns.

    The fact is the ECB is causing it because institutions senority in bond purchases is in danger, why pay for senior bond status if the ECB is going to effectively claim Senior Senior status.

    German and French banks had 4yr to get ready for this moment and essentially the ECB, national governments and various banks did absolutely to get ready for it. The ECB is effectively saying we must reward this insanity by paying back all senior bondholders the full amount with taxpayer cash, however at the same time we the ECB must be paid first. I cannot have senior status if the ECB is ahead of me so essentially people are concluding that senior status is really junior and is in danger of a cut.

    At the moment there are only two ways out of the swamp
    1: cut some of it so it's lower
    or
    2:restructure it into new longer term bonds

    both of these reduce the burden on sovereigns and increase the likelyhood of some or all of the payment.

    At the minute both options are completely off the table and so that only leaves only a total default hence Spanish bonds are rising.

    The market has rightly concluded that there will be a bailout of Spain as there has not in fact been an agreement to ringfence bank debt from sovereign debt
    Last edited by gaelic cowboy; 07-21-2012 at 13:36.
    They slew him with poison afaid to meet him with the steel
    a gallant son of eireann was Owen Roe o'Neill.

    Internet is a bad place for info Gaelic Cowboy

  11. #11
    Sovereign Oppressor Member TIE Fighter Shooter Champion, Turkey Shoot Champion, Juggler Champion Kralizec's Avatar
    Join Date
    Mar 2005
    Location
    Netherlands
    Posts
    5,812

    Default Re: The continuing battle against the inevitable Euro area default

    Loans/bonds granted under relief packages deserve special treatment because they're granted with the goal of keeping the country afloat and are therefore beneficial to the other creditors. One could draw a paralell with insolvent companies who are put under custody; if the business is kept running in the interim the costs of that operation are given preferential status in the case a bankruptcy does eventually occur (or at least; that's the way it works over here)

    Sovereign bonds have traditionally been seen as a safe investment with low returns. France, the Netherlands and especially Germany have recently even sold bonds with negative nominal interest rates - for the plain simple reason that investors in bonds do not generally care about large returns but do care about getting at least their nominal investment back. Spain and Italy's rates are high because bond investors are generally risk averse.

    Banks are not the only problems of the Spanish, but also their autonomous regions who they can barely reign in.
    Last edited by Kralizec; 07-21-2012 at 14:35.

  12. #12
    Senior Member Senior Member gaelic cowboy's Avatar
    Join Date
    Sep 2003
    Location
    mayo
    Posts
    4,833

    Default Re: The continuing battle against the inevitable Euro area default

    Quote Originally Posted by Kralizec View Post
    Loans/bonds granted under relief packages deserve special treatment because they're granted with the goal of keeping the country afloat and are therefore beneficial to the other creditors. One could draw a paralell with insolvent companies who are put under custody; if the business is kept running in the interim the costs of that operation are given preferential status in the case a bankruptcy does eventually occur (or at least; that's the way it works over here)
    nice parralell but a country is not a company as no company sells the majority of it's goods to it's own employees. And the costs in this case will be born by the taxpayer of said country and not the lender.

    Sovereign bonds have traditionally been seen as a safe investment with low returns. France, the Netherlands and especially Germany have recently even sold bonds with negative nominal interest rates - for the plain simple reason that investors in bonds do not generally care about large returns but do care about getting at least their nominal investment back. Spain and Italy's rates are high because bond investors are generally risk averse.
    And there now even more risk averse than before as they have concluded that Spain will be forced to become a bailout country due to the fact that bank debt will not be kept separate from sovereign debt.

    This has increased the likelyhood that no will get paid because effectively were trying to pay everyone.
    They slew him with poison afaid to meet him with the steel
    a gallant son of eireann was Owen Roe o'Neill.

    Internet is a bad place for info Gaelic Cowboy

  13. #13
    Throne Room Caliph Senior Member phonicsmonkey's Avatar
    Join Date
    Apr 2007
    Location
    Cometh the hour, Cometh the Caliph
    Posts
    4,859

    Default Re: The continuing battle against the inevitable Euro area default

    Quote Originally Posted by Kralizec View Post
    negative nominal interest rates
    I think you mean negative real interest rates ie. a small positive nominal rate which, when adjusted for inflation, becomes effectively negative

    sorry to be a pedant
    frogbeastegg's TWS2 guide....it's here!

    Come to the Throne Room to play multiplayer hotseat campaigns and RPGs in M2TW.

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •  
Single Sign On provided by vBSSO