Eurozone debt crisis

[mulberryhawk]

For me I would suggest that the debts which the banks have incurred through bad loans to individuals, businesses and soverigns, will either have to be written down, thereby affecting bank shareholders and depositers as these institutions involved inevitably fail. (presumably the depositers being the public and the shareholders also being the public in the form of pensionholders)

Or as it seems, most of the debts will continue to be transferred onto soverign balance sheets from these bad banks and essentially the burden will be shifted onto the taxpayers of the countries involved, in the form of spending cuts and tax increases in order to pay down the debt.

Whatever way you look at it a certain amount of pain will be involved. Thats my take on it but, its only a subjective view.

[Iron]

Mulberryhawk & Superfrank -

I don't doubt that lenders will have to take a haircut.

But of itself that doesn't mean that wealth has been destroyed - it has merely been transferred, and somewhere in the sum zero game of trading there will be winners who've done very nicely out of the bank's money.

As I said, I think it's the fact that wealth often deteriorates in value that can mean that both the winners and the losers end up out of pocket.

Jeff

[Euler]

This is an interesting read: -

http://www.bruegel.org/publications/pub ... e-summary/

[mulberryhawk]

Fascinating read of what appears to be the unofficial playbook of the EU, IMF etc... especially given the recent announcements by Geithner, Lagarde et al. So a rate cut by the ECB and another round of QE by the FED should raise the stakes in the currency wars.

[Iron]

Is it just me, or does this 'Six weeks to save the Eurozone' sound about as sincere as Blair's '24 hours to save the NHS'?

I bet it was drempt up by a PR person, not an economist!

Jeff

[Zenyatta]

My market odds:

Euro to collapse within 1 year:

Back 1.80, Lay 1.81

Catastrophic global stock market collapse within 3 months (new recession in Europe and US):

Back 2.40, Lay 2.42

[superfrank]

Eurozone rescue plan 'emerging' as IMF and Greece talk
http://www.bbc.co.uk/news/business-15055713

The outline of a large and ambitious eurozone rescue plan is taking shape, reports from the International Monetary Fund (IMF) in Washington suggest.

It is expected to involve a 50% write-down of Greece's massive government debt, the BBC's business editor Robert Peston says.

The plan also envisages an increase in the size of the eurozone bailout fund to 2 trillion euros (£1.7tn; $2.7tn).

'sounds like more of the same to me.
50% won't do it... they're never gonna be able to pay back 10% while in the Euro.
I suppose they think increasing the size of the bailout fund is going to make markets think the other PIIGS are safe - it didn't work before so why is it gonna work now?!

[Iron]

IMHO, governments are whistling in the wind.

The best they can hope for is to kick the can down the road.

And if I were Greek, I'd want my MPs tried for treason for putting the country through more austerity, and merely delaying the inevitable.

Jeff

[superfrank]

So the solution is a €2Tr bailout fund (funded by borrowing and printing by the ECB) to keep the Greek's in the EZ and to recapitalise (give money to) the banks.

We should face facts... they are gonna print until the banks are solvent again. The end.

[Iron]

they are gonna print until the banks are solvent again. The end.

Probably, although that's effectively a default, and could have horrible consequences...

Jeff

[Iron]

German parliament approves expanded EU bailout fund - http://www.bbc.co.uk/news/world-europe-15107538

The markets are surprisingly indifferent - perhaps they are waiting to see what happens next...

Jeff

[Iron]

Some classic Cramer. This was his take in July on Netflix:

http://video.cnbc.com/gallery/?video=3000033170

Since then, the share price has halved:

http://www.google.co.uk/finance?client=ob&q=NASDAQ:NFLX

Jeff

I was surprised that Cramer didn't constantly interrupt Geithner, given his style is very 'in yer face'!

Jeff

[gutuami]

My market odds:

Euro to collapse within 1 year:

Back 1.80, Lay 1.81

Catastrophic global stock market collapse within 3 months (new recession in Europe and US):

Back 2.40, Lay 2.42

I would accept your lay @ 1.81. Talk to you in a year...

[Iron]

Greece won't hit deficit targets in new budget - http://www.msnbc.msn.com/id/44748412/ns ... oipL3JSRuJ

Is anyone really surprised?

Jeff

[Iron]

Eurozone delays decision on next Greek payout

http://www.bbc.co.uk/news/business-15161809

Just the reassurance the markets need...

Jeff