Financial Crisis

[flying]

Visualizing Evolving (Or Mutating) Maturities in US Treasuries.

http://www.zerohedge.com/sites/default/files/etchv1i1.pdf

[Naam]

Well now we know Spain's Air Traffic Controllers have been overpaid... and they get the easy pensions too and perhaps avoid taxes like the rest of the country.... so will hard working Germans, etc. bail them out too to save the Euro?

the politcians will not ask hard working Germans whether they agree or disagree with a bail-out

Germans deserve to get screwed around anyway. Germans seem to be good at is forgetting their past, how much grief they have cost the world.

true! these despicable Germans are too high and mighty to sleep in a BKK 200 Baht per night hotel and because they are not looking for "uncurrupted"

girls who would like to screw for free with some poor young canadian boys (who claim to be scholars of the Austrian School of Economy but have no bloody idea of anything) these German ought to get screwed! as sez... "down vizz ze Tchermanns! skru zem!"

[Naam]

moderators! i asked that question before. isn't a minimum IQ required to post in Thaivisa? if not, i will register my dogs that they can post.

[Abrak]

Germans deserve to get screwed around anyway. Germans seem to be good at is forgetting their past, how much grief they have cost the world.

I wonder if that is true. The Germans and the German economy has made enormous sacrifices over the last 20 years first to accomadate E.Germany and then subsidize irresponsible economies throughout the remains of Europe. It has almost certainly cost them 1-2% growth per annum. I have no idea why but I cant help feeling it might be partially related to some feeling of guilt.

The dilemma that Germany is going to face is this. The last 10 years has seen a delationary environment in Germany and an inflationary one elsewhere in Europe. Germany has probably had the highest 'real' interest rates in the Euro. As a result many if not most Euro countries need to deflate their economies against Germany. Such an adjustment will be very painful. Of course the whole process would be far easier if the problem was simply reversed. Instead of countries deflating towards Germany, Germany simply inflates its way towards them. If Germany was to engineer a debt driven, asset price growth model with rising real wages and a current account deficit, it would work wonders in terms of solving other countries problems. And the reality is that Germany can afford to inflate far more than say Spain can afford to deflate.

Although this doesnt sound very likely it may well happen anyway. If the likes of Ireland Spain and Portugal tighten fiscal policy, the ECB is quite probably going to persue a loose monetary, weak euro policy to mitigate the deflationary effects. Far looser than Germany might consider ideal.

[Abrak]

Its called a gold standard, that does not mean that you would use bullion as currency, it just means that central banks and currencies around the world would be backed by a certain percentage of gold and global trade imbalances would be settled in gold.

Population growth and gold production growth are close on a percentage basis, that is what makes gold such a good medium of exchange.

I often find that the very same people who believe the gold exchanges are dysfunctional because there is a lot of paper gold (ETFs, futures etc) also believe in a gold standard whereby the whole financial system is paper based and backed with gold reserves they dont even think exist.

do you expect logic in the thinking of goldbugs?

Yes, goldbugs who tend to advocate a gold standard are exactly the reason why it could never work. I mean if someone introduced a paper currency backed by gold (of which they held a certain percentage), the first thing the gold bug would do is exchange all his paper for the underlying gold. Afterall they want a gold standard because they dont trust the Government to not inflate away their paper and now they simply wont trust the Government to stick with a gold standard.

[flying]

Yes, goldbugs who tend to advocate a gold standard are exactly the reason why it could never work. I mean if someone introduced a paper currency backed by gold (of which they held a certain percentage), the first thing the gold bug would do is exchange all his paper for the underlying gold. Afterall they want a gold standard because they dont trust the Government to not inflate away their paper and now they simply wont trust the Government to stick with a gold standard.

Isn't that a bit redundant?

I mean if there was a gold standard ( for the record I prefer free gold ) wouldn't the dollar once again be

"As Good As Gold"

In which case I do not see why anyone would rush to cash in the gold certificates anymore than they did before.

Lastly the "gold bug" term is kind of a tired cliche' isn't it ?

I mean it would be like saying all in the markets worship Jim Cramer Cramer bugs?

[lannarebirth]

That is an extremely interesting chart Abrak, but 2003-2004 is like forever ago. Got anything more recent?

This is from a couple days back

Handy sovereign risk table

the risks implied are based on CDS values which the "market" dictates. markets are dumb! if markets were not dumb, clever investors would only make a fraction of the dough which they have made and are still making. let's hope markets will remain dumb for a long time to come. the chances are excellent

I agree,markets are dumb and the CDS imformation is less useful than absolute debt to income levels. Still, though dated, those were some pretty extreme debt/income percentages Abrak posted, if accurate.

[cloudhopper]

Germans deserve to get screwed around anyway. Germans seem to be good at is forgetting their past, how much grief they have cost the world.

This kind of rubbish is what deters me from posting more often here...

[Abrak]

I agree,markets are dumb and the CDS imformation is less useful than absolute debt to income levels. Still, though dated, those were some pretty extreme debt/income percentages Abrak posted, if accurate.

I think that you have to be careful attributing pension and social security liabilities to public debt. These are the liabilities if pension schemes, as is, remain in place. The reason they werent on the balance sheet before is because it was argued that the Government doesnt have to pay them - they can simply cancel pensions. I dont think for one minute any of these Governments are going to honor these commitments. But this wouldnt actually be a default.

I would guess the numbers are fairly accurate (although they are subject to assumptions like GDP growth.) As I mentioned the ECB said the average pension and social security liability for Euroland was 330% of GDP (actually that was just pension fund liability)(and that was based on optimistic assumptions.)

What I do find rather pathetic is that given the future liabilities that all these countries have due to an ageing population (it is not as though you can cancel health care) there is not the slightest attempt by anyone to actually balance their budget now.

[MJP]

I agree,markets are dumb and the CDS imformation is less useful than absolute debt to income levels. Still, though dated, those were some pretty extreme debt/income percentages Abrak posted, if accurate.

I think that you have to be careful attributing pension and social security liabilities to public debt. These are the liabilities if pension schemes, as is, remain in place. The reason they werent on the balance sheet before is because it was argued that the Government doesnt have to pay them - they can simply cancel pensions. I dont think for one minute any of these Governments are going to honor these commitments. But this wouldnt actually be a default.

I would guess the numbers are fairly accurate (although they are subject to assumptions like GDP growth.) As I mentioned the ECB said the average pension and social security liability for Euroland was 330% of GDP (actually that was just pension fund liability)(and that was based on optimistic assumptions.)

What I do find rather pathetic is that given the future liabilities that all these countries have due to an ageing population (it is not as though you can cancel health care) there is not the slightest attempt by anyone to actually balance their budget now.

Do these budgets mean anything? Is economics little more than a theory and an incorrect one at that?

I think the whole thing is one giant fiddle . . . until the oil/cheap energy runs out. Then it's all over.

[churchill]

How many other countries in Europe have been helped by Goldman & Co ?

Wall Street helped dig Europe's debt

"Wall Street tactics like the ones that fostered subprime mortgages in the U.S. have worsened the financial crisis shaking Greece by enabling European governments to hide their mounting debts.

As worries over Greece rattle world markets, records and interviews show that with Wall Street's help, the nation engaged in a decadelong effort to skirt European debt limits. One deal created by Goldman Sachs helped obscure billions in debt from the European Union budget overseers in Brussels.

Even as the crisis was nearing the flashpoint, banks were searching for ways to help Greece forestall the day of reckoning.

In early November – three months before Athens became the epicenter of global financial anxiety – a team from Goldman Sachs arrived in the city with a proposition for a government struggling to pay its bills, say two people who were briefed on the meeting.

The bankers, led by Goldman's president, Gary Cohn, held out a financing instrument that would have pushed debt from Greece's health care system far into the future, much as when strapped homeowners take out second mortgages to pay off their credit cards."

http://www.dallasnews.com/sharedcontent/dw...n2.4c5ae02.html

[MJP]

How many other countries in Europe have been helped by Goldman & Co ?

Wall Street helped dig Europe's debt

"Wall Street tactics like the ones that fostered subprime mortgages in the U.S. have worsened the financial crisis shaking Greece by enabling European governments to hide their mounting debts.

As worries over Greece rattle world markets, records and interviews show that with Wall Street's help, the nation engaged in a decadelong effort to skirt European debt limits. One deal created by Goldman Sachs helped obscure billions in debt from the European Union budget overseers in Brussels.

Even as the crisis was nearing the flashpoint, banks were searching for ways to help Greece forestall the day of reckoning.

In early November – three months before Athens became the epicenter of global financial anxiety – a team from Goldman Sachs arrived in the city with a proposition for a government struggling to pay its bills, say two people who were briefed on the meeting.

The bankers, led by Goldman's president, Gary Cohn, held out a financing instrument that would have pushed debt from Greece's health care system far into the future, much as when strapped homeowners take out second mortgages to pay off their credit cards."

http://www.dallasnews.com/sharedcontent/dw...n2.4c5ae02.html

Again. Does it matter? Does it mean anything? Is all this this just some sort of twisted entertainment, a prelude to the inevitable running out of resources?

I'm getting the feeling . . . yes.

[churchill]

How Greece exposed the slippery slopes of Europe

As European leaders gather to discuss the fate of Greece, Andrew Gilligan finds half of Europe broke, the currency tottering, and a president that can't read a speech.

http://www.telegraph.co.uk/news/worldnews/...-of-Europe.html

The President ??! Who the Fck## is he -

Edited February 14, 2010 by churchill

[Naam]

Germans deserve to get screwed around anyway. Germans seem to be good at is forgetting their past, how much grief they have cost the world.

1. I wonder if that is true. The Germans and the German economy has made enormous sacrifices over the last 20 years first to accomadate E.Germany and then subsidize irresponsible economies throughout the remains of Europe. It has almost certainly cost them 1-2% growth per annum. I have no idea why but I cant help feeling it might be partially related to some feeling of guilt.

2. The dilemma that Germany is going to face is this. The last 10 years has seen a delationary environment in Germany and an inflationary one elsewhere in Europe. Germany has probably had the highest 'real' interest rates in the Euro. As a result many if not most Euro countries need to deflate their economies against Germany. Such an adjustment will be very painful. Of course the whole process would be far easier if the problem was simply reversed. Instead of countries deflating towards Germany, Germany simply inflates its way towards them. If Germany was to engineer a debt driven, asset price growth model with rising real wages and a current account deficit, it would work wonders in terms of solving other countries problems. And the reality is that Germany can afford to inflate far more than say Spain can afford to deflate.

3. Although this doesnt sound very likely it may well happen anyway. If the likes of Ireland Spain and Portugal tighten fiscal policy, the ECB is quite probably going to persue a loose monetary, weak euro policy to mitigate the deflationary effects. Far looser than Germany might consider ideal.

1. reason: bekaus vee Tchermanns are dumb und not as klever as jung Kanadian boys hoo klaim zey attended zee Ostrian Schul of Ekonomie.

2. deflation applies only to immobile property. in all other areas inflation galore!

3. loose ECB policies? no way! Axel Weber will take over from Jean-Claude Trichet.

[MJP]

Germans deserve to get screwed around anyway. Germans seem to be good at is forgetting their past, how much grief they have cost the world.

1. I wonder if that is true. The Germans and the German economy has made enormous sacrifices over the last 20 years first to accomadate E.Germany and then subsidize irresponsible economies throughout the remains of Europe. It has almost certainly cost them 1-2% growth per annum. I have no idea why but I cant help feeling it might be partially related to some feeling of guilt.

2. The dilemma that Germany is going to face is this. The last 10 years has seen a delationary environment in Germany and an inflationary one elsewhere in Europe. Germany has probably had the highest 'real' interest rates in the Euro. As a result many if not most Euro countries need to deflate their economies against Germany. Such an adjustment will be very painful. Of course the whole process would be far easier if the problem was simply reversed. Instead of countries deflating towards Germany, Germany simply inflates its way towards them. If Germany was to engineer a debt driven, asset price growth model with rising real wages and a current account deficit, it would work wonders in terms of solving other countries problems. And the reality is that Germany can afford to inflate far more than say Spain can afford to deflate.

3. Although this doesnt sound very likely it may well happen anyway. If the likes of Ireland Spain and Portugal tighten fiscal policy, the ECB is quite probably going to persue a loose monetary, weak euro policy to mitigate the deflationary effects. Far looser than Germany might consider ideal.

1. reason: bekaus vee Tchermanns are dumb und not as klever as jung Kanadian boys hoo klaim zey attended zee Ostrian Schul of Ekonomie.

2. deflation applies only to immobile property. in all other areas inflation galore!

3. loose ECB policies? no way! Axel Weber will take over from Jean-Claude Trichet.

For what it's worth . . . biflation is a definite in my opinion. But again. Does this mean anything in the face of physical reality?

[MJP]

How Greece exposed the slippery slopes of Europe

As European leaders gather to discuss the fate of Greece, Andrew Gilligan finds half of Europe broke, the currency tottering, and a president that can't read a speech.

http://www.telegraph.co.uk/news/worldnews/...-of-Europe.html

Just get let the German's repo all the BMW's and go back to . . .

. . . what difference does it make?

[Naam]

Germans deserve to get screwed around anyway. Germans seem to be good at is forgetting their past, how much grief they have cost the world.

This kind of rubbish is what deters me from posting more often here...

what do you expect from an uneducated and obviously very poor 25 year old boy who sleeps in 200 Baht/night Bangkok hotels looking for cheap "up country" girls?

Edited February 14, 2010 by Naam

[Abrak]

Yes, goldbugs who tend to advocate a gold standard are exactly the reason why it could never work. I mean if someone introduced a paper currency backed by gold (of which they held a certain percentage), the first thing the gold bug would do is exchange all his paper for the underlying gold. Afterall they want a gold standard because they dont trust the Government to not inflate away their paper and now they simply wont trust the Government to stick with a gold standard.

Isn't that a bit redundant?

I mean if there was a gold standard ( for the record I prefer free gold ) wouldn't the dollar once again be

"As Good As Gold"

The dollar will be as good as gold while the US maintains the gold standard. However they now have no exchange rate policy, no monetary policy. If there is a C/A deficit their gold reserves deplete. If they have a fiscal deficit their gold reserves deplete. China can sell all its treasuries because the exchange rate is fixed. Compared to printing, inflation and deficits it aint much fun. At some point they will declare fiat or devalue their paper. How much faith is anyone going to have in the US Government being tied down by the disciplines imposed by a gold standard.

Gold backed paper from the Government one day, can turn into paper or paper worth half as much in terms of gold the next day

Lastly the "gold bug" term is kind of a tired cliche' isn't it ?

I mean it would be like saying all in the markets worship Jim Cramer Cramer bugs?

True. Apologies.

[LaoPo]

3. loose ECB policies? no way! Axel Weber will take over from Jean-Claude Trichet.

It seems Mr. Axel Weber's chances are growing (backed by France) versus Italian Mario Draghi, also a very powerful financial giant and Governor of Italy's CB, although I prefer to have a German at the helm right now, in a period the EU is in heavy waters.

It will give the ECB and the Euro a more credible sense of comfort and positive outlook than having an Italian.....from a country which is in deep trouble also.

LaoPo

[sokal]

these despicable Germans are too high and mighty to sleep in a BKK 200 Baht per night hotel and because they are not looking for "uncurrupted" girls who would like to screw for free with some poor young canadian boys (who claim to be scholars of the Austrian School of Economy but have no bloody idea of anything) these German ought to get screwed! as sez... "down vizz ze Tchermanns! skru zem!

freakin Krauts.....

[sokal]

Germans deserve to get screwed around anyway. Germans seem to be good at is forgetting their past, how much grief they have cost the world.

I wonder if that is true. The Germans and the German economy has made enormous sacrifices over the last 20 years first to accomadate E.Germany and then subsidize irresponsible economies throughout the remains of Europe. It has almost certainly cost them 1-2% growth per annum. I have no idea why but I cant help feeling it might be partially related to some feeling of guilt.

The dilemma that Germany is going to face is this. The last 10 years has seen a delationary environment in Germany and an inflationary one elsewhere in Europe. Germany has probably had the highest 'real' interest rates in the Euro. As a result many if not most Euro countries need to deflate their economies against Germany. Such an adjustment will be very painful. Of course the whole process would be far easier if the problem was simply reversed. Instead of countries deflating towards Germany, Germany simply inflates its way towards them. If Germany was to engineer a debt driven, asset price growth model with rising real wages and a current account deficit, it would work wonders in terms of solving other countries problems. And the reality is that Germany can afford to inflate far more than say Spain can afford to deflate.

Although this doesnt sound very likely it may well happen anyway. If the likes of Ireland Spain and Portugal tighten fiscal policy, the ECB is quite probably going to persue a loose monetary, weak euro policy to mitigate the deflationary effects. Far looser than Germany might consider ideal.

Let everyone in the euro zone that is going broke, go broke. That will have short term negative effects on the euro but will have good long term effects. Bailing everyone out will be just the opposite. Good short term effects and deadly long term effects.

[sokal]

Its called a gold standard, that does not mean that you would use bullion as currency, it just means that central banks and currencies around the world would be backed by a certain percentage of gold and global trade imbalances would be settled in gold.

Population growth and gold production growth are close on a percentage basis, that is what makes gold such a good medium of exchange.

I often find that the very same people who believe the gold exchanges are dysfunctional because there is a lot of paper gold (ETFs, futures etc) also believe in a gold standard whereby the whole financial system is paper based and backed with gold reserves they dont even think exist.

do you expect logic in the thinking of goldbugs?

Yes, goldbugs who tend to advocate a gold standard are exactly the reason why it could never work. I mean if someone introduced a paper currency backed by gold (of which they held a certain percentage), the first thing the gold bug would do is exchange all his paper for the underlying gold. Afterall they want a gold standard because they dont trust the Government to not inflate away their paper and now they simply wont trust the Government to stick with a gold standard.

Gold bugs would only do that in extreme cases. Gold bugs where not as loud with Geroge Bushes 400 billion dollar deficits and Greenspans 2% interest rates but what do you expect with Obamas 3.8 trillion dollar deficits and Bernankes 0% interest rates ? Of course the gold bugs are going nuts.

[sokal]

I agree,markets are dumb and the CDS imformation is less useful than absolute debt to income levels. Still, though dated, those were some pretty extreme debt/income percentages Abrak posted, if accurate.

I think that you have to be careful attributing pension and social security liabilities to public debt. These are the liabilities if pension schemes, as is, remain in place. The reason they werent on the balance sheet before is because it was argued that the Government doesnt have to pay them - they can simply cancel pensions. I dont think for one minute any of these Governments are going to honor these commitments. But this wouldnt actually be a default.

I would guess the numbers are fairly accurate (although they are subject to assumptions like GDP growth.) As I mentioned the ECB said the average pension and social security liability for Euroland was 330% of GDP (actually that was just pension fund liability)(and that was based on optimistic assumptions.)

What I do find rather pathetic is that given the future liabilities that all these countries have due to an ageing population (it is not as though you can cancel health care) there is not the slightest attempt by anyone to actually balance their budget now.

Do these budgets mean anything? Is economics little more than a theory and an incorrect one at that?

I think the whole thing is one giant fiddle . . . until the oil/cheap energy runs out. Then it's all over.

That is what people where brain washed with in the 70s. The Fed lost control of the money supply and covered it up by saying that oil was running out when really the only thing running out was the purchasing power of the USD.

Why do you just assume that those pieces of paper in your wallet or those digits in your bank account have some magical constant value ?

Edited February 14, 2010 by sokal

[MJP]

I agree,markets are dumb and the CDS imformation is less useful than absolute debt to income levels. Still, though dated, those were some pretty extreme debt/income percentages Abrak posted, if accurate.

I think that you have to be careful attributing pension and social security liabilities to public debt. These are the liabilities if pension schemes, as is, remain in place. The reason they werent on the balance sheet before is because it was argued that the Government doesnt have to pay them - they can simply cancel pensions. I dont think for one minute any of these Governments are going to honor these commitments. But this wouldnt actually be a default.

I would guess the numbers are fairly accurate (although they are subject to assumptions like GDP growth.) As I mentioned the ECB said the average pension and social security liability for Euroland was 330% of GDP (actually that was just pension fund liability)(and that was based on optimistic assumptions.)

What I do find rather pathetic is that given the future liabilities that all these countries have due to an ageing population (it is not as though you can cancel health care) there is not the slightest attempt by anyone to actually balance their budget now.

Do these budgets mean anything? Is economics little more than a theory and an incorrect one at that?

I think the whole thing is one giant fiddle . . . until the oil/cheap energy runs out. Then it's all over.

That is what people where brain washed with in the 70s. The Fed lost control of the money supply and covered it up by saying that oil was running out when really the only thing running out was the value of the USD.

That was like 30 years ago and then some. Population explosion, development of Chindia . . . come on now, it's changed, consumption is huge now.

I still think all this, Gold's Up!, USD's collapsing!, Markets are going to tank on Monday! stuff, is just light entertainment . . . when clearly there is no ambition to change from the model of needless over-consumption, primarily to satisfy the imaginary numbers of a handful of evil men.

It's no more consequential than watching X-Factor.

I don't by the way. The fiat money value bit.

Edited February 14, 2010 by MJP

[Abrak]

Gold bugs would only do that in extreme cases. Gold bugs where not as loud with Geroge Bushes 400 billion dollar deficits and Greenspans 2% interest rates but what do you expect with Obamas 3.8 trillion dollar deficits and Bernankes 0% interest rates ? Of course the gold bugs are going nuts.

Sokal, the underlying reason you want a gold standard is because you do not consider any Government financially responsible enough to have independent fiscal and monetary policies. You therefore wish them to be handcuffed by a gold standard which would prevent ludicrous fiscal deficits and irresponsible printing of money. (All this is difficult to argue with.)

However, just like the Euro, these handcuffs will not make the Government financially responsible it will simply lead them to get rid of the handcuffs. You do not trust the US Government to be financially responsible....full stop. If there was a gold standard in place today you would be arguing why it was about to be abandoned. If there was a gold backed paper currency, you would take the gold.

Bottom line. The gold standard is supposed to instill discipline (particularly in a reserve currency) when times get tough. And yet every time times got tough in the last century 1914, 1931, 1971, the central reserve currency simply abandoned the gold standard.

[Abrak]

It's no more consequential than watching X-Factor.

It really is hard to believe there is anything more important than X-Factor although Brad and Angelina's relationship is obviously a cause for concern.

[ronz28]

Buy, buy American Pie

[MJP]

It's no more consequential than watching X-Factor.

It really is hard to believe there is anything more important than X-Factor although Brad and Angelina's relationship is obviously a cause for concern.

That made me chuckle.

Do you get it though? I mean am I right in saying this? All this relentless UP DOWN UP DOWN stuff . . . . it makes no odds in the long run as the whole shabang is based on something that's going to run out sooner or later.

I dunno . . . guess I'm just trying to reconcile what I think is the real big picture.

Branson warning about the 'oil crunch' the other day. Well, if so, it's over. All this FX, CDS, MBS, CDO, AAA, BBB, that's all it is . . . letters.

[sokal]

That was like 30 years ago and then some. Population explosion, development of Chindia . . . come on now, it's changed, consumption is huge now.

I still think all this, Gold's Up!, USD's collapsing!, Markets are going to tank on Monday! stuff, is just light entertainment . . . when clearly there is no ambition to change from the model of needless over-consumption, primarily to satisfy the imaginary numbers of a handful of evil men.

It's no more consequential than watching X-Factor.

I don't by the way. The fiat money value bit.

Your making an argument about the peak oil theory. That is a different subject, it has nothing to do with money and credit.

There is no possible way, 0% chance for the same amount of consumption to continue, it is all a function of low interest rates. All low interest rates and debt does is squeeze longer periods of production into shorter time frames. Excessive debt causes (X)amount years of economic activity to be squeezed into less years because all if the final payments on the activity was deferred by (X) amount of years. That is why a boom has to be followed by a bust, its as predictable as gravity. That is why during booms(low interest rates), there is unusually low amounts of unemployment and during busts there is unusually high amounts of unemployment.

[sokal]

It's no more consequential than watching X-Factor.

It really is hard to believe there is anything more important than X-Factor although Brad and Angelina's relationship is obviously a cause for concern.

That made me chuckle.

Do you get it though? I mean am I right in saying this? All this relentless UP DOWN UP DOWN stuff . . . . it makes no odds in the long run as the whole shabang is based on something that's going to run out sooner or later.

I dunno . . . guess I'm just trying to reconcile what I think is the real big picture.

Branson warning about the 'oil crunch' the other day. Well, if so, it's over. All this FX, CDS, MBS, CDO, AAA, BBB, that's all it is . . . letters.

Nope, your totally wrong. Because of low interest rates all over the world, we probably burned 20 years worth of oil in 10 years so when the system busts, we will have way too much oil infrastructure and capacity then we need for the following bust years.