The BillyB, Aster & JR8 roundtable!

[Strong Eagle]

I think Paul Krugman has it right.

http://www.nytimes.com/2011/09/26/opini ... aulkrugman

[JR8]

I like his opening line

Paul Krugman is a perpetual advocate of Keynesian money-printing. I.e. Making those already in debt even more indebted, in an attempt to help them, er out of their debt.

I think the credit bubble we have had in the west over say the period 1999-2008 was a myth (as in it was not grounded in fundamentals or sustainable), and I don't think trying to pump that myth back up with yet more money is the solution.

Quantitative easing is simply deferred taxation that will come due in the future. It is also simply a band-aid that allows one to hobble on a bit longer. So, a very expensive and ultimately futile band-aid.

I think balanced budgets are the solution for the future. If that means 'austerity', perhaps returning to spending levels of five years ago, I cannot see how that implies it is somehow going to be the end of the world.

[Strong Eagle]

I like his opening line

Paul Krugman is a perpetual advocate of Keynesian money-printing. I.e. Making those already in debt even more indebted, in an attempt to help them, er out of their debt.

I think the credit bubble we have had in the west over say the period 1999-2008 was a myth (as in it was not grounded in fundamentals or sustainable), and I don't think trying to pump that myth back up with yet more money is the solution.

Quantitative easing is simply deferred taxation that will come due in the future. It is also simply a band-aid that allows one to hobble on a bit longer. So, a very expensive and ultimately futile band-aid.

I think balanced budgets are the solution for the future. If that means 'austerity', perhaps returning to spending levels of five years ago, I cannot see how that implies it is somehow going to be the end of the world.

I think there is another perspective. There is no question that someone, maybe everyone, is going to get hurt... not only in Greece, and maybe Spain and Italy. The question is... how to deliver the hurt?

One way is austerity... guarantees that all get hit... with the attendant risks that you create deflation and a downward spiral that is hard to stop... a point made by Krugman.

The other way is to inflate the currency... this delivers hurt to bond holders... and maybe not a bad thing... far too many crashes have been created by an influx of cash and loans, only to be pulled back out again.

If Greece jumped onto the Drachma and promptly inflated it, quite a few good things would happen... at least compared to the track the EU is going down now.

[BillyB]

I like his opening line

Paul Krugman is a perpetual advocate of Keynesian money-printing. I.e. Making those already in debt even more indebted, in an attempt to help them, er out of their debt.

I think the credit bubble we have had in the west over say the period 1999-2008 was a myth (as in it was not grounded in fundamentals or sustainable), and I don't think trying to pump that myth back up with yet more money is the solution.

Quantitative easing is simply deferred taxation that will come due in the future. It is also simply a band-aid that allows one to hobble on a bit longer. So, a very expensive and ultimately futile band-aid.

I think balanced budgets are the solution for the future. If that means 'austerity', perhaps returning to spending levels of five years ago, I cannot see how that implies it is somehow going to be the end of the world.

I think there is another perspective. There is no question that someone, maybe everyone, is going to get hurt... not only in Greece, and maybe Spain and Italy. The question is... how to deliver the hurt?

One way is austerity... guarantees that all get hit... with the attendant risks that you create deflation and a downward spiral that is hard to stop... a point made by Krugman.

The other way is to inflate the currency... this delivers hurt to bond holders... and maybe not a bad thing... far too many crashes have been created by an influx of cash and loans, only to be pulled back out again.

If Greece jumped onto the Drachma and promptly inflated it, quite a few good things would happen... at least compared to the track the EU is going down now.

Financial taxation you mean? London will suffer and it will just make the EU less competitive.....

[JR8]

I think there is another perspective. There is no question that someone, maybe everyone, is going to get hurt... not only in Greece, and maybe Spain and Italy. The question is... how to deliver the hurt?

One way is austerity... guarantees that all get hit... with the attendant risks that you create deflation and a downward spiral that is hard to stop... a point made by Krugman.

The other way is to inflate the currency... this delivers hurt to bond holders... and maybe not a bad thing... far too many crashes have been created by an influx of cash and loans, only to be pulled back out again.

If Greece jumped onto the Drachma and promptly inflated it, quite a few good things would happen... at least compared to the track the EU is going down now.

I think the hurt needs to be taken by those who could have avoided it being necessary in the first place. So in the case of say Greece, that means the Greeks. No EU citizen voted for a debt union, in fact the concept is illegal under the various EU treaties, so trying to ram one through on the EU taxpayers shilling is going to stoke social unrest at the least.

I think a parallel question would be how to limit hurt? One way would be to accept that some eurozone members are in a position of no return and need an exit. Showering money on them only increases the eventual hurt. What is getting in the way of there being exit-plans? That the euro is more a political project rather than an economic one, and the politicians cannot admit or accept that they have failed. Our increased hurt for the sake of their political vanity.

I have a problem trying to grasp how we arrived at a position of neither bondholders or banks (etc) having to assume the financial cost of any of the risks that they took. What happened to risk? I’d be all for seeing a few savage haircuts, and a few banks topple. It might encourager les autres as they say.

Greece can’t jump on the drachma, the EU won’t let it. Even this week some EU sock-puppet (Barrosso or Trichet or..) was declaring that Greece will never leave the euro. There is an argument to be made that Germany is the odd one out in the euro, maybe they should leave; 72% of Germans didn’t want to join in the first place.

[aster]

Financial taxation you mean? London will suffer and it will just make the EU less competitive.....

Tax the living daylights out of the banks, or be gentle and do that small turnover thing. If they don't want to pay then they can get the f*** out for all I care.

Too bad the US has no balls any more and is under the foot of the shylocks. One snap of their finger and the US economy goes into complete freefall that would make the laws of gravity look like a slow motion replay...

[JR8]

The continual antisemitism is getting a bit wearying.

We know you don't like bankers, but can't you bring yourself to mention them without the racist overtones?

[BillyB]

Financial taxation you mean? London will suffer and it will just make the EU less competitive.....

Tax the living daylights out of the banks, or be gentle and do that small turnover thing. If they don't want to pay then they can get the f*** out for all I care.

Too bad the US has no balls any more and is under the foot of the shylocks. One snap of their finger and the US economy goes into complete freefall that would make the laws of gravity look like a slow motion replay...

Aster, it will affect FX transactions with all banks in the EU - the cost will simply be passed straight on to the end user.

If you are looking to point the finger - spread it between the government, policy makers, academics, and the banks. Really, you should be incensed toward the home loan companies, the ratings agencies and the insurers. the banks jumped on the bandwagon and took most of the blame, but if you look at the facts - there were far many other root causes to the GFC and the ripples across the world this has caused since 2007.

[JR8]

Cold harsh reality versus ideological pipe-dreams.
-------------------------------------------------------------


Financial markets hold politicians to account over the euro crisis

‘...governments played quite a part in allowing and encouraging the bankers to get us into this pickle in the first place. Another is that governments have simultaneously been responsible for many other pickles.

The euro is one of these. Markets did not create the euro, politicians did. And they made a thoroughly bad job of it. Now they blame the markets for spotting their shoddy workmanship.

For all their faults, financial markets are one of the few agents in society that are able to hold our dysfunctional politicians to account. In the ordinary political process, the politicians can easily dissemble, pretend and forget, while talking airily about the sunlit uplands and yet delivering nothing. The voters may be disillusioned but they go on voting.

The markets are not taken in by such twaddle. Voting with their money, they are much tougher. And they have alternatives. The result is that they can be brutal in their judgments. That is surely why continental politicians hate them so much.’
http://www.telegraph.co.uk/finance/comm ... risis.html


Greece default not an option, says Jean-Claude Juncker

‘Concerns that Greece will never dig out of its mountain of debt - and the volatility in markets that has accompanied the slow and often halting European decision-making process - has led many observers to urge that Athens simply be allowed to default and maybe be forced out of the euro.

Juncker, who chairs the meetings of eurozone finance ministers, emphatically denied that such a solution was on the table.

"We had no one advocating a default for Greece," he told reporters in the early hours of Tuesday after an hour-long meeting. "Everything will be done to avoid that and it will be avoided."
http://www.telegraph.co.uk/finance/fina ... ncker.html

[aster]

Aster, it will affect FX transactions with all banks in the EU - the cost will simply be passed straight on to the end user.

This reminds me that the rip-off differences for buy/sell rates used should be looked at when it comes to future legislation.

[BillyB]

I think we are teetering on the edge of another global financial meltdown....

[JR8]

I was trying to see how Dexia fared in the recent EU bank stress tests, but couldn't find a report that went down to the bank by bank level.

p.s. They still haven't passed the bail-out funds agreed in July, it is currently tied up in the Slovenian parliament.

[BillyB]

I was trying to see how Dexia fared in the recent EU bank stress tests, but couldn't find a report that went down to the bank by bank level.

p.s. They still haven't passed the bail-out funds agreed in July, it is currently tied up in the Slovenian parliament.

You'd probably find a catastrophic failure massaged over with some creative reports...

[JR8]

I was trying to see how Dexia fared in the recent EU bank stress tests, but couldn't find a report that went down to the bank by bank level.

p.s. They still haven't passed the bail-out funds agreed in July, it is currently tied up in the Slovenian parliament.

You'd probably find a catastrophic failure massaged over with some creative reports...

Well quite. For starters we know that the auditors were told not to consider bank cross-holdings. The whole thing was going to be a charade anyway, like the rest of EU politics.

I was reading over the weekend that the EU would not be calling for further stress tests so soon after the previous ones, as that would be 'humiliating' in underlining that the previous ones were of no value.

[BillyB]

I was trying to see how Dexia fared in the recent EU bank stress tests, but couldn't find a report that went down to the bank by bank level.

p.s. They still haven't passed the bail-out funds agreed in July, it is currently tied up in the Slovenian parliament.

You'd probably find a catastrophic failure massaged over with some creative reports...

Well quite. For starters we know that the auditors were told not to consider bank cross-holdings. The whole thing was going to be a charade anyway, like the rest of EU politics.

I was reading over the weekend that the EU would not be calling for further stress tests so soon after the previous ones, as that would be 'humiliating' in underlining that the previous ones were of no value.

I'm sure the worse case scenario benchmark for the stress tests would have been the GFC, so if it was done properly they shouldn't need any more. But knowing the EU - they probably cocked it up and inserted conditions allowing banks to bring stuff off balance sheet or place in 'floating' holdings and not report against it. Or the products were too complicated for the legislators to measure and price accurately - that's always a good one. It's the blind leading the blind, or rather the blind being led by the banks. Like being both prosecution and defence at a court trial.

Apparently Dexia has 350bn of total toxic loans including gov bnds from all the PIGS on their books despite only stating 150bn or so. Let's see the knock on effect that has when the full exposure is discovered. They were known as 'the hoover' for some time - buying up crap and issuing stuff that nobody wanted, especially in the risky muni bonds mkt, which by themselves are good until they go wrong.

As we keep saying - the EU is one big shit storm and i'm just waiting for the wheels to come off and it to spiral into the abyss triggering another round of GFC 2 (GFC 2 - the sequel, but bigger and better and this time its Europe's fault). It's like deja vu.......