Euro Area

[gaelic cowboy]

Interesting...

If the companies were forced into "pre-packaged" bankruptcy, all contracts can be reviewed / broken. Might have been a better option.

Yes if they were put into examinership or recievership, not if there bailed out or brought into state ownership which is what happened.

[phonicsmonkey]

if they were put into examinership or recievership

Then their bad loans would have to be marked to market, their creditors and the counterparties to all their transactions would realise a whole load of currently unrealised losses, financial contagion would spread like wildfire again as banks would be unable to lend to each other and to industry, the economies of western countries and quite possibly export-driven emerging market countries would fall off a cliff and we'd fall back into a depression the like of which we haven't seen since the 30s.

Which is why the government stepped in to begin with, right?

[Fragony]

Then their bad loans would have to be marked to market, their creditors and the counterparties to all their transactions would realise a whole load of currently unrealised losses, financial contagion would spread like wildfire again as banks would be unable to lend to each other and to industry, the economies of western countries and quite possibly export-driven emerging market countries would fall off a cliff and we'd fall back into a depression the like of which we haven't seen since the 30s.

Which is why the government stepped in to begin with, right?

So they say, plenty a top-economist insists it's better to default, for us and for these feta-munchers

[phonicsmonkey]

So they say, plenty a top-economist insists it's better to default, for us and for these feta-munchers

Let's be clear - to all intents and purposes Greece has defaulted. It can't pay its debts and others are being forced to do so for it. The only debate is whether the resulting loss is taken by governments (via bailout funds) or by the banks that hold its loans.

For me the scariest chart I saw throughout the whole financial crisis in '08 had nothing to do with bank losses but showed the volume of global trade. It fell off an enormous cliff because banks were not extending the finance necessary to keep it going. World trade is the world economy.

Whatever you think about the causes of all these issues (and I am increasingly coming to the view that there was clear fraudulent activity on a massive scale in the origination and packaging of the sub-prime mortgage loans) one thing is clear to me: the banks are in too much of a mess to be simply cut loose. This was true in '08 and it remains true now because substantially the same problem exists and has simply been moved from one place to another.

[Furunculus]

one thing is clear to me: the banks are in too much of a mess to be simply cut loose. This was true in '08 and it remains true now because substantially the same problem exists and has simply been moved from one place to another.

only problem is that western governments no longer have any spare money, or any good credit, with which to launch into round 2.0 of the bailout circus.

[phonicsmonkey]

only problem is that western governments no longer have any spare money, or any good credit, with which to launch into round 2.0 of the bailout circus.

I think Germany and France are creditors of sufficiently good standing to sit behind the eurozone debtors, if the political will were there. Which of course it is not.

[Furunculus]

I think Germany and France are creditors of sufficiently good standing to sit behind the eurozone debtors, if the political will were there. Which of course it is not.

france isn't.

and as you note there is no political will to subsidise non-family massively in perpetuity.