The problem with that is that thanks to our deregulated financial system the collapse of Greece will likely take down a bunch of OUR banks, which will wind up exposed to somebody who is exposed to greek debt, with all that exposure magnified enormously by CDO's and other derivatives products.
Greece given world's lowest credit rating
- Thread starter danmand
- Start date
http://www.reuters.com/news/pictures/slideshow?articleId=USRTR2O78B#a=1
What I find problematic is the "austerity" demanded of Greece amounts to a dissolution of a country and its people, underway because it is expedient for power and wealth mongers.
Sara
What I find problematic is the "austerity" demanded of Greece amounts to a dissolution of a country and its people, underway because it is expedient for power and wealth mongers.
Sara
B
burt-oh-my!
What I would like to see in these situations is that the correct people pay. Some people made bad economic decisions, and some people (not always the same ones) benefitted from those decisions, and they should be the ones to lose.
I see two groups:
In the country itself ( and when I say " the country " it applies to Greece but any other country or even sector of the economy for that matter):
It appears as though there is a case to be made that the average Greek person benefitted because apparently (and I do not have exact facts) they lived beyond their means via not paying adequate taxes. Civil servants are apparently way too numerous and inefficient there, so they clearly need to be cut back, although it is galling to think that in effect there will be some 100% loser civil servants, while others sail on smoothly because the form that the cut-back will take will quite possible be in the form of staff reductions. .
But who else in that country benefitted by living beyond its means? I am pretty sure that all kinds of Greeks got a free ride. I find it hard to believe that the wealthy didn't do pretty well out of the whole system - they usually do.
But what about the outsiders who lent to them? Generally, you have financial institutions, and investment funds. Here I have big bone to pick with the way things go down, because there is always a big hue and cry about how we cant let the system fail etc, so what happens is that the bailout benefits wealthy shareholders and bondholders. In some cases they take big haircuts, but the bondholders and owners of preferred shares of these institutions generally DON'T LOSE A SINGLE DIME. That's what I object to. In the US bailout that's what happenned.
Yes, the institutions need to be saved in that you don't want depositors losing their money (although, if they flocked to a particular financial institution because it was oferring significantly higher than market rates, then there again they should be made to re-learn the connection between higher returns and higher risk). But you can save an institution and still shareholders wiped out and bondholders and preferred shareholders lose , say , 50%.
Otherwise, these bailouts truly are a vast transfer of wealth from the middle class and poor (the poor not via cash but via slower growth which affects them via unemployment/wage growth) to the wealthy who own these bonds and preferred shares.
Referring to deregulation and th eCanadian system, if Canadian banks have not done their homework about who/what they do business with, they too need to live with their decisions. They'll survive. Banks make bad decisions all the time, companies they lend to go bankrupt. Canadian banks have generally done very poorly in the US, they have lost money there.
De-regulation has allowed the risks to be spread out all over the place, but it also brings opportunities 'all over the place'. I think of deregulation like international investing: I can easily invest in Indonesia now, so if for instance Indonesia's economy implodes, the effect can be felt outside of Indonesia, by foreign shareholders. But that means that if I feel it more, somebody else is feeling it less, so I see it as a wash
I see two groups:
In the country itself ( and when I say " the country " it applies to Greece but any other country or even sector of the economy for that matter):
It appears as though there is a case to be made that the average Greek person benefitted because apparently (and I do not have exact facts) they lived beyond their means via not paying adequate taxes. Civil servants are apparently way too numerous and inefficient there, so they clearly need to be cut back, although it is galling to think that in effect there will be some 100% loser civil servants, while others sail on smoothly because the form that the cut-back will take will quite possible be in the form of staff reductions. .
But who else in that country benefitted by living beyond its means? I am pretty sure that all kinds of Greeks got a free ride. I find it hard to believe that the wealthy didn't do pretty well out of the whole system - they usually do.
But what about the outsiders who lent to them? Generally, you have financial institutions, and investment funds. Here I have big bone to pick with the way things go down, because there is always a big hue and cry about how we cant let the system fail etc, so what happens is that the bailout benefits wealthy shareholders and bondholders. In some cases they take big haircuts, but the bondholders and owners of preferred shares of these institutions generally DON'T LOSE A SINGLE DIME. That's what I object to. In the US bailout that's what happenned.
Yes, the institutions need to be saved in that you don't want depositors losing their money (although, if they flocked to a particular financial institution because it was oferring significantly higher than market rates, then there again they should be made to re-learn the connection between higher returns and higher risk). But you can save an institution and still shareholders wiped out and bondholders and preferred shareholders lose , say , 50%.
Otherwise, these bailouts truly are a vast transfer of wealth from the middle class and poor (the poor not via cash but via slower growth which affects them via unemployment/wage growth) to the wealthy who own these bonds and preferred shares.
Referring to deregulation and th eCanadian system, if Canadian banks have not done their homework about who/what they do business with, they too need to live with their decisions. They'll survive. Banks make bad decisions all the time, companies they lend to go bankrupt. Canadian banks have generally done very poorly in the US, they have lost money there.
De-regulation has allowed the risks to be spread out all over the place, but it also brings opportunities 'all over the place'. I think of deregulation like international investing: I can easily invest in Indonesia now, so if for instance Indonesia's economy implodes, the effect can be felt outside of Indonesia, by foreign shareholders. But that means that if I feel it more, somebody else is feeling it less, so I see it as a wash
Easy to say that. Much harder to accept when the failure of one of our banks throws our entire economy into a nasty recession. Especially since the way the CDO market is structured our banks really have no way of knowing how exposed they are. Banks take large positions with each other all the time as a matter of their ordinary business, on the assumption that the foreign counter-party bank is in good health. If the counter-party bank has been playing recklessly with Greek CDO's--well, our banks have really no way of knowing that until the counter-party goes bust in a startling announcement, leaving our bank holding the bag.
This fear that we don't know which foreign bank we can trust will send LIBOR through the roof, and that will create a drag on the whole global economy, sending us ALL into recession.
B
burt-oh-my!
Banks have some information on these things. They are not completely in the dark. And if they are diversified, and not over-exposed to one counterparty, they should be fine. If not, they SHOULD suffer the consequences.
As for the recession, I think sometimes a short sharp recession, clear out all the dead wood, then get on with things is better than trying endlessly to make it that nobody suffers, an dinstead we all suffer in dribs and drabs for decades.
Anyhow, like my post said, make shareholders get wiped out FIRST before any talk of government bailouts to ensure none of the obligations of the bank come into play.
Trust me, it wouldn't take long before shareholders got wise and demanded management not take such huge risks.
Furthermore, if that was the case, loans which were expected to be sold off to outside counterparties via derivatives would not find buyers, and so the increased standards of cdo buyers would eventually get transmitted to loan originators, preventing the bad loans from being made in the first place.
As for the recession, I think sometimes a short sharp recession, clear out all the dead wood, then get on with things is better than trying endlessly to make it that nobody suffers, an dinstead we all suffer in dribs and drabs for decades.
Anyhow, like my post said, make shareholders get wiped out FIRST before any talk of government bailouts to ensure none of the obligations of the bank come into play.
Trust me, it wouldn't take long before shareholders got wise and demanded management not take such huge risks.
Furthermore, if that was the case, loans which were expected to be sold off to outside counterparties via derivatives would not find buyers, and so the increased standards of cdo buyers would eventually get transmitted to loan originators, preventing the bad loans from being made in the first place.
Once again, Canadian banks aren't that exposed and should survive any major meltdown without too many scars.
No, actually, they are completely in the dark. CDO's are written privately with no requirement for public disclosure. Nobody knows which financial institutions have dangerous levels of exposure to a Greek default. It shouldn't be that way, but it is that way, owing to reckless deregulation of the financial system.
I don't think you understand the psychology or the mechanics of a run on the banks. What happens is that banks lose confidence in one another, as none of them know who is exposed. They actually start out responding as you describe: They start diversifying, and they become wary of lending any significant amount of money to other financial institutions. This makes it difficult for banks to borrow from one another, so the interbank rate, LIBOR, shoots up to stupidly high interest rates. That first off puts a drag on the global economy, and sends us into a global recession. The recession worsens the situation, lowering trust further, and raising LIBOR even more.
At some point during this process somebody really does turn up holding a bag of shit. That bank faces a large loss, and an immediate loss of confidence in an environment in which it is stupidly difficult to borrow money. That banks creditors start to flee, and because interbank lending has become impossible, the bank has no way to cover its obligations. In a matter of hours it is toast.
That is EXACTLY what happened in the last recession, and exactly how several large banks failed. It is murderously bad for the economy. Ordinary businesses start finding it difficult to raise finances for ordinary business transactions, international trade becomes unreasonably expensive, and so on. It hits the real economy when, for example, shipping companies start having trouble arranging financing to have their cargo unloaded at foreign ports.
All this could be avoided if we made sure that no bank would ever be caught holding the bag of shit, either by making the bag of shit illegal (outlawing CDO's) or else, as Anynym suggested, passing laws forcing full disclosure of them, so at least then everyone would know who had the bag of shit, and there wouldn't be the general loss of trust between other institutions. The failure of that bank creates a new bag of shit--who is holding CDO's on its debt? And the process starts up again. It can knock banks over one by one like dominoes if it gets out of control, and it can take a huge, huge infusion of taxpayer dollars to keep the whole financial system from crashing completely (a'la TARP).
It's retarded that we learned no lessons from the last time out, and that we're about to slam our heads once again into the same stupid brick wall. We should have learned something.
As for the recession, I think sometimes a short sharp recession, clear out all the dead wood, then get on with things is better than trying endlessly to make it that nobody suffers, an dinstead we all suffer in dribs and drabs for decades.
Anyhow, like my post said, make shareholders get wiped out FIRST before any talk of government bailouts to ensure none of the obligations of the bank come into play.
Trust me, it wouldn't take long before shareholders got wise and demanded management not take such huge risks.
Furthermore, if that was the case, loans which were expected to be sold off to outside counterparties via derivatives would not find buyers, and so the increased standards of cdo buyers would eventually get transmitted to loan originators, preventing the bad loans from being made in the first place.[/QUOTE]
B
burt-oh-my!
Some information about cdo ownership:
http://orgnet.com/cdo.html
http://www.propublica.org/special/interactive-cdos-interlocking-ownership#cdo/
Not completely in the dark after all.
http://orgnet.com/cdo.html
http://www.propublica.org/special/interactive-cdos-interlocking-ownership#cdo/
Not completely in the dark after all.
B
burt-oh-my!
Furthermore, the financial community is as gossippy as any other - word gets around.
Look, if bad lending has occurred, SOMEBODY is going to suffer. If it was a bank, then the bank should suffer - like I said, its shareholders and bondholders. The government can step in for depositors.
Look, if bad lending has occurred, SOMEBODY is going to suffer. If it was a bank, then the bank should suffer - like I said, its shareholders and bondholders. The government can step in for depositors.
Reconstructing positions in some specific CDO years after the fact from retrospective audits and historical accounting data is not really the same thing as having broad visibility into who owns what on a current, real-time basis. Sorry.
If yiu think that Greece deafaulting is bad, wait until a big bank fails and see the "ripple effect". It won' be pretty. It might even affect your pension fund.
They lied about the condition of their national economy and that whole Greece cradle of democracy guilt trip gave them an edge.
Other than those two reasons I've no clue why as they seem incapable of balancing anything.
Selling gold teeth to make ends meet in Greece
http://www.reuters.com/article/2011...c=401&feedType=RSS&feedName=bondsNews&rpc=401
Jun 30, 2011
Daniel Flynn
ATHENS, June 30 (Reuters) - A smartly dressed woman waits as a young man
behind a glass screen weighs her gold earrings, bracelets and rings and
counts out 1,600 euros.
"I'll see you again soon," she says, slipping the bills into her
purse. Behind her, a grey-haired man shuffles towards the counter. "Do
you buy gold teeth?" he asks.
In the Greek capital, gold is marking a divide between the "haves"
and a growing number of "have nots".
Shops like this one have mushroomed in downtown Athens and are doing
a brisk business. They offer cash for gold by weight and sell it to
foundries.
Many ordinary Greeks who prospered after the Mediterranean country entered
the euro a decade ago are now being forced to sell their family treasures
just to make ends meet.
With the worst recession since the 1970s grinding into its third year,
fresh belt-tightening measures to appease international lenders are
driving many middle-class Greeks to desperation.
Unemployment has climbed to more than 16 percent and real wages are
down by around a fifth since the global financial crisis struck three
years ago.
With average salaries less than 1,300 euros ($1,900) a month and inflation
running at more than 3 percent, many Greeks say they do not have enough
money to pay for the basics.
"A lady came to me the other day crying because she needed to sell her
gold jewels and didn't know what they were worth," said Alexandria
Verykokaki, 55, whose family has owned a jewellery shop in downtown
Athens since 1923.
"These are not poor folks. They are ordinary, middle-class Greeks: a
woman with three kids who needs to sell her wedding jewellery just to
send her kids to school."
GOLD RUSH FOR WEALTHY
That is one side of the coin. On the other, many wealthy Greeks, worried
by the political paralysis gripping their country, are pulling money
out of the bank and buying gold, regarded as the ultimate safe haven in
times of uncertainty.
Burnishing its appeal, the price of the precious metal has climbed to
record highs over the last year, driven in part by anxiety in financial
markets over Greece's prolonged agony which has prompted a flight to
stable assets.
Many international investors believe the eastern Mediterranean country,
which makes up just 2.5 percent of the euro zone economy, cannot hope to
service its enormous debt running at nearly 350 billion euros and rising.
Many in Greece appear to agree. Banks have lost around 8 percent of
their deposits this year, with outflows accelerating in May and June
as anxiety grew at the government's dwindling parliamentary support,
according to credit ratings agency Moody's.
Roughly half the fall was due to individuals and companies burning
through their savings to compensate for their lower income.
But the rest was due to wealthier Greeks, fearful of an impending
financial collapse should the country default, sending money abroad,
stashing it in safety deposit boxes, or buying gold coins, Moody's said.
"The people with money are no longer buying land, they are buying gold
and silver," said Verykokaki. "Greeks are ignorant. It's stupid because
if they take the money from the bank, the banks won't have enough to
go around."
With capital flight compounded by a increasing number of loans turning
bad, authorities have urged banks to explore merger possibilities to
cope with the crisis.
The flow of capital from banks could become a flood if the government
fails to implement the 28 billion euro austerity plan, demanded by the
European Union and the International Monetary Fund as a condition for
propping up its finances.
In a tight vote on Wednesday, parliament approved a law outlining tax
rises, spending cuts and the sale of state companies.
But Greece's privatisation process, which stalled when the Socialists
won power, may struggle to meet targets amid the political and economic
maelstrom. Greece needs to sell 5 billion euros in assets by December
to honour its commitments, but foreign investors may be wary faced with
militant unions.
"The prime minister talks about privatisation, tax reforms, social
reforms. He's talked about all that before," said political analyst
Costas Panagopoulos. "The question is will he use this vote to move
forward with these crucial reforms?"
Greece's debt is forecast to reach 1.6 times its economic output next
year -- bigger than Argentina's when the South American country stumbled
into a chaotic default in early 2002.
Many Greeks believe not only that it is not economically feasible, but
it is not morally acceptable to pay a debt racked up by the political
dynasties which have ruled the country for decades.
"I want to tear down the parliament building. We didn't waste all this
money, they did, and they are not going to jail," said Dimitris Avramidis,
34, a bookstore employee.
"I've done nothing wrong. I've never taken out a loan in my life. So why
should I pay now? I want people to take all their money out of the banks."
http://www.reuters.com/article/2011...c=401&feedType=RSS&feedName=bondsNews&rpc=401
Jun 30, 2011
Daniel Flynn
ATHENS, June 30 (Reuters) - A smartly dressed woman waits as a young man
behind a glass screen weighs her gold earrings, bracelets and rings and
counts out 1,600 euros.
"I'll see you again soon," she says, slipping the bills into her
purse. Behind her, a grey-haired man shuffles towards the counter. "Do
you buy gold teeth?" he asks.
In the Greek capital, gold is marking a divide between the "haves"
and a growing number of "have nots".
Shops like this one have mushroomed in downtown Athens and are doing
a brisk business. They offer cash for gold by weight and sell it to
foundries.
Many ordinary Greeks who prospered after the Mediterranean country entered
the euro a decade ago are now being forced to sell their family treasures
just to make ends meet.
With the worst recession since the 1970s grinding into its third year,
fresh belt-tightening measures to appease international lenders are
driving many middle-class Greeks to desperation.
Unemployment has climbed to more than 16 percent and real wages are
down by around a fifth since the global financial crisis struck three
years ago.
With average salaries less than 1,300 euros ($1,900) a month and inflation
running at more than 3 percent, many Greeks say they do not have enough
money to pay for the basics.
"A lady came to me the other day crying because she needed to sell her
gold jewels and didn't know what they were worth," said Alexandria
Verykokaki, 55, whose family has owned a jewellery shop in downtown
Athens since 1923.
"These are not poor folks. They are ordinary, middle-class Greeks: a
woman with three kids who needs to sell her wedding jewellery just to
send her kids to school."
GOLD RUSH FOR WEALTHY
That is one side of the coin. On the other, many wealthy Greeks, worried
by the political paralysis gripping their country, are pulling money
out of the bank and buying gold, regarded as the ultimate safe haven in
times of uncertainty.
Burnishing its appeal, the price of the precious metal has climbed to
record highs over the last year, driven in part by anxiety in financial
markets over Greece's prolonged agony which has prompted a flight to
stable assets.
Many international investors believe the eastern Mediterranean country,
which makes up just 2.5 percent of the euro zone economy, cannot hope to
service its enormous debt running at nearly 350 billion euros and rising.
Many in Greece appear to agree. Banks have lost around 8 percent of
their deposits this year, with outflows accelerating in May and June
as anxiety grew at the government's dwindling parliamentary support,
according to credit ratings agency Moody's.
Roughly half the fall was due to individuals and companies burning
through their savings to compensate for their lower income.
But the rest was due to wealthier Greeks, fearful of an impending
financial collapse should the country default, sending money abroad,
stashing it in safety deposit boxes, or buying gold coins, Moody's said.
"The people with money are no longer buying land, they are buying gold
and silver," said Verykokaki. "Greeks are ignorant. It's stupid because
if they take the money from the bank, the banks won't have enough to
go around."
With capital flight compounded by a increasing number of loans turning
bad, authorities have urged banks to explore merger possibilities to
cope with the crisis.
The flow of capital from banks could become a flood if the government
fails to implement the 28 billion euro austerity plan, demanded by the
European Union and the International Monetary Fund as a condition for
propping up its finances.
In a tight vote on Wednesday, parliament approved a law outlining tax
rises, spending cuts and the sale of state companies.
But Greece's privatisation process, which stalled when the Socialists
won power, may struggle to meet targets amid the political and economic
maelstrom. Greece needs to sell 5 billion euros in assets by December
to honour its commitments, but foreign investors may be wary faced with
militant unions.
"The prime minister talks about privatisation, tax reforms, social
reforms. He's talked about all that before," said political analyst
Costas Panagopoulos. "The question is will he use this vote to move
forward with these crucial reforms?"
Greece's debt is forecast to reach 1.6 times its economic output next
year -- bigger than Argentina's when the South American country stumbled
into a chaotic default in early 2002.
Many Greeks believe not only that it is not economically feasible, but
it is not morally acceptable to pay a debt racked up by the political
dynasties which have ruled the country for decades.
"I want to tear down the parliament building. We didn't waste all this
money, they did, and they are not going to jail," said Dimitris Avramidis,
34, a bookstore employee.
"I've done nothing wrong. I've never taken out a loan in my life. So why
should I pay now? I want people to take all their money out of the banks."
Define Greece:http://en.wikipedia.org/wiki/Greece
Greece, also known as Hellas and officially the Hellenic Republic (Ελληνική Δημοκρατία, Ellīnikī́ Dīmokratía, IPA: [eliniˈci ðimokraˈtia][10]), is a country in southeastern Europe. Situated on the southern end of the Balkan Peninsula,......
Modern Greece traces its roots to the civilization of ancient Greece, generally considered the cradle of Western civilization. As such, it is the birthplace of democracy, Western philosophy, the Olympic Games, Western literature and historiography, political science, major scientific and mathematical principles, university education, the first coin, and Western drama, including both tragedy and comedy.
A developed country with an advanced, high-income economy, a very high Human Development Index (22nd highest in the world as of 2010) and consistently high quality of life rankings,
Current Situation: Economic Crisis- EU has flipped the first coin and Greece won. The Bank of Greece in Athens is has run of outta storage from more loans-coins.
Happy Canada Day !
Greece, also known as Hellas and officially the Hellenic Republic (Ελληνική Δημοκρατία, Ellīnikī́ Dīmokratía, IPA: [eliniˈci ðimokraˈtia][10]), is a country in southeastern Europe. Situated on the southern end of the Balkan Peninsula,......
Modern Greece traces its roots to the civilization of ancient Greece, generally considered the cradle of Western civilization. As such, it is the birthplace of democracy, Western philosophy, the Olympic Games, Western literature and historiography, political science, major scientific and mathematical principles, university education, the first coin, and Western drama, including both tragedy and comedy.
A developed country with an advanced, high-income economy, a very high Human Development Index (22nd highest in the world as of 2010) and consistently high quality of life rankings,
Current Situation: Economic Crisis- EU has flipped the first coin and Greece won. The Bank of Greece in Athens is has run of outta storage from more loans-coins.
Happy Canada Day !
