Eurozone debt crisis

[Euler]

With the current uncertainty in Europe and in particular the forthcoming Greek elections, LMAX feel it is prudent for our clients to analyse positions and any contingent orders going into this weekend, to ensure you are comfortable with your exposure.

LMAX, being a true exchange model is reliant upon our market makers to provide pricing at all times, with these prices coming from Tier 1 Banks and industry leading market makers. During discussions with our market makers, we believe Sunday night opening might see unprecedented volatility, naturally enhancing risk of market gapping, margin call and position stop out scenarios.

[Iron]

In other words, 'Fasten your seatbelts, things are going to get a bit rough!'

Jeff

[superfrank]

In other words, 'Fasten your seatbelts, things are going to get a bit rough!'

Jeff

i doubt it, not for a while anyway.

it looks like the anti-bailout bloc in Greece won't win, and the EZ and UK have just printed a shed load more money just in case.

the cycle is now well established...

asset prices fall > print money > asset prices rise > [repeat]

obviously sooner or later all this funny money is going to create big problems, but the people in charge are content that it will be someone else's problem when the day of reckoning comes.

[andyfuller]

obviously sooner or later all this funny money is going to create big problems, but the people in charge are content that it will be someone else's problem when the day of reckoning comes.

On This Week last night Portillo said his 'Moment of the week' was:

"The deficit of private pension funds has reached £312 billion pounds...it has gone up from £25 billion a year ago, and has gone up more than £100 billion in a month...why? Mainly because the Bank of England is printing money, the value of the Gilts the Pension Funds hold is devalued by the printing of money...this is a massive problem and it has been brought about by Government policy...Money money everywhere"

[Euler]

Inflation is better than deflation though. I don't think they have much choice.

[jimrobo]

had the same messages from my broker too.

I heard the figure of a potential 1.1 for the eur/usd if the election go's tits up on sunday!

Markets seem really unsettled today. Get the impression there is a lot of flattening out of positions going on.

[superfrank]

Inflation is better than deflation though. I don't think they have much choice.

are you sure about that?!

better for some (rich + debtors), worse for others (poor).

deflation myth
http://www.google.co.uk/search?q=deflat ... channel=np

[Tobedotty]

I agree Euler, inflation is the endgame here but the germans are avoiding it like the plague - I think its too politically sensitive there (possibly because of the 1920s? If it is, you would've thought they'd be over that by now...)

[Iron]

Decisive euro action is needed at the G20 summit - by Gordon Brown

http://blogs.reuters.com/great-debate/2 ... 20-summit/

'Recapitalizing the Spanish banks with 100 billion euros cannot wish away what are, in effect, 2 trillion euros of external private-sector liabilities that are difficult to refinance. For months now the Spanish have relied on the European Central Bank to step in, but soon their collateral on offer will not be good enough.'

Jeff

[superfrank]

I agree Euler, inflation is the endgame here but the germans are avoiding it like the plague - I think its too politically sensitive there (possibly because of the 1920s? If it is, you would've thought they'd be over that by now...)

i guess economic fundamentals must have changed in the last 90 years?!



more recently Zimbabwe tried the new paradigm economics of printing money to finance deficits but that didn't end too well either.

[superfrank]

Decisive euro action is needed at the G20 summit - by Gordon Brown
Jeff

why anyone listens to one of the main architects of the credit bubble/crunch is beyond me.

[Euler]

But if you let deflation take its grip the whole thing slides to a halt. No incentive to spend or invest if you know it will be cheaper tomorrow.

I know hyperinflation isn't the answer either. But despite everybody knowing that running up debt beyond your capacity to finance it was bad, everybody did it. So there needs to be a correction of sorts.

I think a lot of the money printing going on at the moment is really to prop up the fractional reserve system, not pumping it into the 'real' monetary system.

[superfrank]

But if you let deflation take its grip the whole thing slides to a halt. No incentive to spend or invest if you know it will be cheaper tomorrow.

that's the argument but we've had deflation in consumer electronics for the past 30 years and it didn't stop anyone buying (and it's been a very successful sector).

there's a very good reason that economists in the Reagan/Thatcher era tried to stamp out inflation... it acts as a growth limiter because people have less money to spend. e.g. rising energy prices. Also, in the era globalisation, there can be no equivalent wage inflation so real incomes suffer even more.

[mulberryhawk]

hyperinflation frank are u for real? there is no demand for credit in the economy, people are too busy paying down their debt. look at the velocity of money.....there cant be hyperinflation unless the money printed actually finds itself out into the economy.

Look at the effects of debt deflation policies in the eurozone. House prices down over 50%, markets capitulate, pensions wiped out, social fabric becomming frayed at the edges, household wealth and societal destruction on a massive scale.

and you are suggesting deflation will allow people to buy cheaper houses when the property market crashes.....with what money when unemployment will be over 20% and banks are wiped out of existence to lend money.

what you are suggesting with ensure we end up right back in the 1930s except this time on a worldwide scale.

[Iron]

Even if these new stimuli do get banks to start lending, I'm not sure that's necessarily a good thing.

Let's that the Mervyn King prints some money, and basically uses it to pay the banks to increase lending to small businesses. So let's say that as a result of this scheme, Bodgit and Co Plumbers are able to buy a new van (which was made in India) for £5K. Because business is sluggish, in a year's time they can't make repayments on the van, and have to sell it. The overall upshot is that the retail bank takes a haircut for a couple of K, and that wealth was transferred from our economy to the Indian economy.

What I'm driving at is that loans should be made on a sound assessment of fundamentals. If the fundamentals are dodgy, then the banks would be making dodgy loans, and isn't that a big part of what got us into this mess in the first place?

Jeff

I think a lot of the money printing going on at the moment is really to prop up the fractional reserve system, not pumping it into the 'real' monetary system.