26 thoughts on “Weekend reflections

  1. Good morning from Europe. A brief look at my screen: CDS on Greek bonds 650 (+165!) basispoints. Yield on 2 years bonds 10.10%, on 10 years 8.8%. Puhhh … what a mess! I’m now waiting for some German idiot politician to explain to some nuthead journalist, that the yields are reasonable and there’s no need to worry or do something. Mister Market is always right and now it’s upon the Greeks to sort things out.

    According to CNN the SEC staffers were enjoying watching porn while the economy blew up. I’m wondering what the central bankers in Frankfurt are doing right now? Given their inclination most probable playing Solitaire in the breaks and working hard on some papers how current monetary policies by the ECB effect exchange rates and trade flows with the great nations on Alpha Centauri. I’m frustrated!

    We need a revolution. And the first scheduled for the guillotine are neo-classical neo-liberal economists aka terrorists.

  2. @John Coochey

    There is a difference between making do as a necessity in time of war and constructing a punitive penal colony to punish asylum seekers for exercising a right we would rather they didn’t exercise. If we really want to discourage them from seeking asylum, why don’t we simply sink a few boats at sea. I am sure the defense force would welcome the practice.

  3. @Stephan

    Whoever, the EU or IMF is planning to eventually bail the Greeks out should be selling CDSs at those high prices and buying bonds at the high yields, that way the eventual bailout would cost considerably less than it otherwise will. Of course, these turkeys would want to intervene in the market, on ideological grounds. If it was China or Hong Kong they would think twice about doing it as it is an obvious opportunity for an easy profit.

  4. Not only that, intervention could reduce the likelihood of a need for a bailout while at the same time providing the EU or IMF with a tidy profit.

  5. As a interesting corollary, sensible legal intervention of this kind when Hedge funds are engaging in destructive destabilising activity, is an excellent way of for government to make a little money, as well as bring a little stability to the financial market and punish those Hedge funds where they really hate it, in terms of performance and hence bonuses.

    This is precisely what the Hong Kong monetary authority did very successfully during the ’98 crisis when Hedge funds were attacking the Hang Seng and the HK dollars link to the US dollar. In that case, monetary authority won easily and the Hedge funds lost big. The Hedge funds in that case were fools, once it became clear the monetary authority was willing to play, there was no other possible outcome.

  6. “According to CNN the SEC staffers were enjoying watching porn while the economy blew up.”

    In the circumstances, they were simply trying to keep their moral up. Or, at least, that is what they claimed.

  7. @Freelander
    I’m with you! It’s high-time for ECB central-bankers to launch a counter-attack against these suckers. Given that the Euro is a FIAT currency without any convertibility and free floating exchange rates, the ECB is the 800 pound gorilla in town and not the other way round. But unfortunately ECB bankers subscribe to ideological nonsense produced by some defunct economists, who’s monetary thinking is still firmly grounded in some ancient Goldstandard reminiscences.

  8. @John Coochey
    I take it, John, that you’d been placed there by an organisation that was processing your application to be recognised as a refugee, or your application to be accepted somewhere to resettlement? Not just warehoused for an indefinite time period, without access to information about whether you’d be summarily returned to the regime from which you’d fled, no access to even a friendly face, since I presume those guarding you didn’t address you or treat you as scum and presumably you were aware that there would eventually be an end to your incarceration.

  9. The balance sheet approach to money is sooooooooooo overstretched. It worked when money consisted of commodity money (gold and silver) only. All financial markets are interrelated but there is no corresponding information collection process available. I doubt whether anybody has a good estimate on the number of financial landmines still to go off; not even regarding Goldman-Sachs only:

    I doubt whether anybody has a good estimate on the number of financial landmines still to go off.

  10. Its a great life being a banker. Through your greed and incompetence the world suffers a financial crisis. As part of the rescue, governments pump massive liquidity into the system and lower their rates. Because of banker incompetence, which now even they recognise, one bank cannot trust another because they don’t know what toxic and undeclared assets they are hiding. As a result of this lack of trust, banks are less willing to lend to each other and the interbank rate goes through the roof. Note not due to a lack of lendable funds but because banks can’t trust each other they demand a large premium. As a result banks say “the cost of funds is high” and jack up interest rates and their margins. As a result they make massive profits which can be sourced directly to their incompetence. As a result of massive profits sourced to their incompetence they give themselves massive bonuses.
    Oh, what fun!

  11. @Freelander

    Freelander, your nothing if not idealistic. That is an extremely high risk trade. Considering a loss on such a trade would almost be untenable the EU and IMF would be locking themselves in to guaranteeing 300 bill euro of debt.

    The problem isn’t the market, it’s Greece.

  12. @sdfc

    It is not risky at all. That is precisely the point and why China and Hong Kong wouldn’t was a minute thinking before doing it. It is money for nothing.

    The problem is Greece but the problem is being exacerbated by market speculation. I would punish both and make a little money for the government if I worked for the EU or IMF.

    Unfortunately they are too hide bound and blinded by ideology to pick the piles of $500 notes lying on the sidewalk.

  13. Freelander

    Greece is running huge budget deficits. They have a massive, growing pile of debt.

    Buying their debt would require either the ECB creating money or governments taking on liabilities of their own. All this to the tune of 300 billion (and growing) euro.

  14. Either the IMF and the EU are going to bail Greece out or they are not. If they are not they should not do the intervention I suggest, they could take the other side of the market and make a profit that way. If they are going to bail them out then do what I suggest will lower the costs of bailing them out. Simple as that.

  15. The whole thing is equivalent to betting on yourself, whether or not you will cross the finish line in a race in which you are the only participant. Others do not what the outcome will be, but you can choose whether you will cross the line or not, so for you the bet doesn’t entail any risk at all.

  16. I think they’re crossing their fingers Freelander. They fell they have to bail Greece out but, they’re concerned about how much it’s going to cost and whether they’ll eventually be successful.

    Any bailiout is dependent on Greece doing the right thing and rein in spending. Unfortunately this will make things worse for a lot of people. This why I’m not sure the Greek’s are going to be able to rein in spending.

    What price a coup of some sort?

  17. The real problem is the Greeks, who have gotten used to evading taxes and who, apparently, are likely to riot if anyone tries to start making them pay the taxes they owe. If the Greeks are foolish enough to vote out any government that might dare to make them pay their taxes then it is pointless bailing them out. Personally, I would advise the IMF and the EU to not bail them out. Let them go bankrupt. There is the contagion worry but at least the other PIIGs are bail-out-able. Letting Greece go but defending the others should not cause too much disruption to the Eurozone. But it seems the decision to bail them out has been made, in which case those bailing them out should do the trades that give them some free money. Nothing wrong with picking up some free money. Ask any banker.

  18. I read that Goldman Sachs are very involved with the development of the Greek Debt through unethical practices.

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