|
Spain has announced an $11bn bailout for its troubled bank, Bankia, a month after nationalising it.
Luis de Guindos, the econmy minister, told a congressional committee that the state would have to put at least $11bn into saving Bankia, which he said would be fully nationalised in the process.
Losses at Bankia, Spain's fourth largest bank, have deepened investor fears that the fragile financial system could become more vulnerable as default rates rise in a recession.
Government sources, meanwhile, said de Guindos and other senior officials were at odds over how to help the country's 17 autonomous regions refinance $45bn in debt that comes due this year.
Bankia's new management team will undertake a complete assessment of the lender's capital needs and will present its plan in mid-June, de Guindos said.
The government will recapitalise Bankia's parent group BFA using the state-backed bank restructuring fund, the FROB, and then will fund Bankia through a capital increase including preferential shares for existing shareholders, the minister said.
Source
|
I dont understand the existing shareholders part. The bank was nationalized shouldent the goverment own like 99 % or so? i mean shareholders are the owners and the bank starts to fail. To keep savers from losing everything you nationalize. I thougth that was basically the goverment forcibly feeding the bank money while diluting the shares (and getting all the new ones). That way owners lose their investments while people with money in the bank and the goverment comes out mostly unharmed.
|
On May 25 2012 05:02 CuddlyCuteKitten wrote:
I dont understand the existing shareholders part. The bank was nationalized shouldent the goverment own like 99 % or so? i mean shareholders are the owners and the bank starts to fail. To keep savers from losing everything you nationalize. I thougth that was basically the goverment forcibly feeding the bank money while diluting the shares (and getting all the new ones). That way owners lose their investments while people with money in the bank and the goverment comes out mostly unharmed.
When you are shareholder of a company about to go bankrupt, what do you have to lose if the government jumps in to save it?
As a shareholder you would be glad to give away your part of the cake to the government even for a really bad price.
And that's the best case scenario.
If the whole thing goes bankrupt you won't hold anything anyway and the government can just jump in or not.
Standard procedure of insolvency is: find an investor ready to buy it up or let it land in front of a court.
Since this bank will land in front of a court anyway cause noone is willing to buy it, the govt might aswell jump in before that happens and try to limit the damage.
Saying the govt will come out unharmed isn't true.
If the funds come from the government and not some european fund, then they are effectively paying tax money to save tax money, but probably paying more than saving, after all bank managers earn sick amounts of money and the bank most likely still has bad investitions up and running.
Then they own a bank gone bad...and who's gonna buy it?
|
On May 23 2012 08:29 coverpunch wrote:Show nested quote +On May 23 2012 06:00 WhiteDog wrote:
You are kidding yourself if you think banks are "helping greece" for political reasons. They are making profit out of Greece current situation, profit that is even easier to make if you take into consideration how everything that has/is happening was highly previsible. Untrue! Germany always treated the euro as more of a political union than an economic one. The rest of Europe, especially France, treated the euro as an economic thing and not a political one. The Germans wanted to present a nice face that they had moved on from their prewar ambitions. Most other Europeans wanted to get out of the thumb of the Deustchmark. The irony is that both sides ended up with exactly what they didn't want. Germany more than ever finds itself controlling Europe's economic destiny. The rest of Europe finds itself under arguably greater domination by Germany than ever before. And the solution nobody in Europe wants to hear: everyone should just be more German. The biggest problem is that Greece's problems WERE preventable. But by who? The Greeks? They would have kicked off the European Economic Crisis long ago if not for the EU's bailouts. They would be what Thailand was in 1997. The Germans? They tried but they're only going to try so hard. The rest of Europe? To varying degrees, they're as fiscally irresponsible as the Greeks.
I partially disagree with you. Germany is clearly the country that has been more benefitted from the euro, because it has enabled a large increase in exports to the Eurozone. By the way, this imbalance is one of the roots of our current situation in Europe. Germans have political reasons for promoting the European Union, but the economical one is the main one for adopting the euro - EU and Eurozone are similar but not the same.
Besides France and the UK, the rest of Europe understands that, in a globalized world, each country by itself will have little to no influence in global decisions, so there are both strong political and economical reasons to enter the EU. In France and the UK, it was more related to avoiding another war with Germany. I agree that currently they have little political interest. For me that is clearly a mistake: UK and France influence in the world is decreasing, and is going to be near to zero in 20 years, due to emerging coutries.
Only the Greeks themselves would have been able to prevent their problems. More specifically, their poticians could have not lied to the rest of the EU about theis debt levels.
The rest of Europe is absolutely not nearly as irresponsible as that. For example, Spain (my country) has been very disciplined in spending before 2008, at least our governments. Spanish debt was at 36% of the GDP in 2007, lower than any other large country in the developed world. After 4 years of "the worst economical crysis since 1929" plus "the largest real estate bubble explosion since xxx" plus "the worst debt crysis in Europe's since yyyy" (talking about Greece), we still have lower public debt levels than France, Italy, Germany and of course the US. We have other major problems, of course, but fiscal responsability has not been a factor in our current situation.
|
On May 25 2012 05:19 Cattivik wrote:Show nested quote +On May 25 2012 05:02 CuddlyCuteKitten wrote:
I dont understand the existing shareholders part. The bank was nationalized shouldent the goverment own like 99 % or so? i mean shareholders are the owners and the bank starts to fail. To keep savers from losing everything you nationalize. I thougth that was basically the goverment forcibly feeding the bank money while diluting the shares (and getting all the new ones). That way owners lose their investments while people with money in the bank and the goverment comes out mostly unharmed. When you are shareholder of a company about to go bankrupt, what do you have to lose if the government jumps in to save it? As a shareholder you would be glad to give away your part of the cake to the government even for a really bad price. And that's the best case scenario. If the whole thing goes bankrupt you won't hold anything anyway and the government can just jump in or not. Standard procedure of insolvency is: find an investor ready to buy it up or let it land in front of a court. Since this bank will land in front of a court anyway cause noone is willing to buy it, the govt might aswell jump in before that happens and try to limit the damage. Saying the govt will come out unharmed isn't true. If the funds come from the government and not some european fund, then they are effectively paying tax money to save tax money, but probably paying more than saving, after all bank managers earn sick amounts of money and the bank most likely still has bad investitions up and running. Then they own a bank gone bad...and who's gonna buy it?
Standard procedures are not so standard any more.
For example greek banks are about to get 18billion euro of recapitalization that would normaly name the goverment the major shareholder easily. Instead they gonna use some exotic kind of bonds called CoCos that the government will buy and that will permit the bankers to keep the control. And of course those money add to the national debt, about +9% of GDP.
|
On May 25 2012 06:24 Xamo wrote:Show nested quote +On May 23 2012 08:29 coverpunch wrote:On May 23 2012 06:00 WhiteDog wrote:
You are kidding yourself if you think banks are "helping greece" for political reasons. They are making profit out of Greece current situation, profit that is even easier to make if you take into consideration how everything that has/is happening was highly previsible. Untrue! Germany always treated the euro as more of a political union than an economic one. The rest of Europe, especially France, treated the euro as an economic thing and not a political one. The Germans wanted to present a nice face that they had moved on from their prewar ambitions. Most other Europeans wanted to get out of the thumb of the Deustchmark. The irony is that both sides ended up with exactly what they didn't want. Germany more than ever finds itself controlling Europe's economic destiny. The rest of Europe finds itself under arguably greater domination by Germany than ever before. And the solution nobody in Europe wants to hear: everyone should just be more German. The biggest problem is that Greece's problems WERE preventable. But by who? The Greeks? They would have kicked off the European Economic Crisis long ago if not for the EU's bailouts. They would be what Thailand was in 1997. The Germans? They tried but they're only going to try so hard. The rest of Europe? To varying degrees, they're as fiscally irresponsible as the Greeks. I partially disagree with you. Germany is clearly the country that has been more benefitted from the euro, because it has enabled a large increase in exports to the Eurozone. By the way, this imbalance is one of the roots of our current situation in Europe. Germans have political reasons for promoting the European Union, but the economical one is the main one for adopting the euro - EU and Eurozone are similar but not the same. Besides France and the UK, the rest of Europe understands that, in a globalized world, each country by itself will have little to no influence in global decisions, so there are both strong political and economical reasons to enter the EU. In France and the UK, it was more related to avoiding another war with Germany. I agree that currently they have little political interest. For me that is clearly a mistake: UK and France influence in the world is decreasing, and is going to be near to zero in 20 years, due to emerging coutries. Only the Greeks themselves would have been able to prevent their problems. More specifically, their poticians could have not lied to the rest of the EU about theis debt levels. The rest of Europe is absolutely not nearly as irresponsible as that. For example, Spain (my country) has been very disciplined in spending before 2008, at least our governments. Spanish debt was at 36% of the GDP in 2007, lower than any other large country in the developed world. After 4 years of "the worst economical crysis since 1929" plus "the largest real estate bubble explosion since xxx" plus "the worst debt crysis in Europe's since yyyy" (talking about Greece), we still have lower public debt levels than France, Italy, Germany and of course the US. We have other major problems, of course, but fiscal responsability has not been a factor in our current situation.
Spains dept problem is the speed at which the dept level is rising ... not the acutal level itself thats true.
And when you say germany profited from the euro that is somewhat true.... but the main reason why the German politicians do anything to keep the troubled countries paying their depts is that the germans own a big part of it. And this is is only possible to happen when you have huge trade imbalances ... meaning because germans dont buy enoughn stuff from the others, they have to pay the balance on credit... which in the long run will drive them into ruin ... and its creditor with them.
all this made possible by the euro, because the value of currencies couldn't balance the problem ( otherwise german currency would be much higher and say greece muchg lower -> german goods expencive in greek, greek goods cheap in germany -> more germans buying greek stuff/doing hollliday, greeks would buy fewer BMW -> trade imbalances would be reduce)
|
On May 25 2012 06:28 accela wrote:Show nested quote +On May 25 2012 05:19 Cattivik wrote:On May 25 2012 05:02 CuddlyCuteKitten wrote:
I dont understand the existing shareholders part. The bank was nationalized shouldent the goverment own like 99 % or so? i mean shareholders are the owners and the bank starts to fail. To keep savers from losing everything you nationalize. I thougth that was basically the goverment forcibly feeding the bank money while diluting the shares (and getting all the new ones). That way owners lose their investments while people with money in the bank and the goverment comes out mostly unharmed. When you are shareholder of a company about to go bankrupt, what do you have to lose if the government jumps in to save it? As a shareholder you would be glad to give away your part of the cake to the government even for a really bad price. And that's the best case scenario. If the whole thing goes bankrupt you won't hold anything anyway and the government can just jump in or not. Standard procedure of insolvency is: find an investor ready to buy it up or let it land in front of a court. Since this bank will land in front of a court anyway cause noone is willing to buy it, the govt might aswell jump in before that happens and try to limit the damage. Saying the govt will come out unharmed isn't true. If the funds come from the government and not some european fund, then they are effectively paying tax money to save tax money, but probably paying more than saving, after all bank managers earn sick amounts of money and the bank most likely still has bad investitions up and running. Then they own a bank gone bad...and who's gonna buy it? Standard procedures are not so standard any more. For example greek banks are about to get 18billion euro of recapitalization that would normaly name the goverment the major shareholder easily. Instead they gonna use some exotic kind of bonds called CoCos that the government will buy and that will permit the bankers to keep the control. And of course those money add to the national debt, about +9% of GDP.
Bonds require an interest being paid for their acquisition, if it's in € that would be a pretty stupid move for profit intentions.
But not sure if it's of any relevance to the Greek govt if they earn anything now, they'll just try to keep alive every bank they can while they crash.
Btw, since you live in Greece, of what dimensions was the recent bankrun?
|
On May 25 2012 06:24 Xamo wrote:Show nested quote +On May 23 2012 08:29 coverpunch wrote:On May 23 2012 06:00 WhiteDog wrote:
You are kidding yourself if you think banks are "helping greece" for political reasons. They are making profit out of Greece current situation, profit that is even easier to make if you take into consideration how everything that has/is happening was highly previsible. Untrue! Germany always treated the euro as more of a political union than an economic one. The rest of Europe, especially France, treated the euro as an economic thing and not a political one. The Germans wanted to present a nice face that they had moved on from their prewar ambitions. Most other Europeans wanted to get out of the thumb of the Deustchmark. The irony is that both sides ended up with exactly what they didn't want. Germany more than ever finds itself controlling Europe's economic destiny. The rest of Europe finds itself under arguably greater domination by Germany than ever before. And the solution nobody in Europe wants to hear: everyone should just be more German. The biggest problem is that Greece's problems WERE preventable. But by who? The Greeks? They would have kicked off the European Economic Crisis long ago if not for the EU's bailouts. They would be what Thailand was in 1997. The Germans? They tried but they're only going to try so hard. The rest of Europe? To varying degrees, they're as fiscally irresponsible as the Greeks. I partially disagree with you. Germany is clearly the country that has been more benefitted from the euro, because it has enabled a large increase in exports to the Eurozone. By the way, this imbalance is one of the roots of our current situation in Europe. Germans have political reasons for promoting the European Union, but the economical one is the main one for adopting the euro - EU and Eurozone are similar but not the same. Besides France and the UK, the rest of Europe understands that, in a globalized world, each country by itself will have little to no influence in global decisions, so there are both strong political and economical reasons to enter the EU. In France and the UK, it was more related to avoiding another war with Germany. I agree that currently they have little political interest. For me that is clearly a mistake: UK and France influence in the world is decreasing, and is going to be near to zero in 20 years, due to emerging coutries. Only the Greeks themselves would have been able to prevent their problems. More specifically, their poticians could have not lied to the rest of the EU about theis debt levels. The rest of Europe is absolutely not nearly as irresponsible as that. For example, Spain (my country) has been very disciplined in spending before 2008, at least our governments. Spanish debt was at 36% of the GDP in 2007, lower than any other large country in the developed world. After 4 years of "the worst economical crysis since 1929" plus "the largest real estate bubble explosion since xxx" plus "the worst debt crysis in Europe's since yyyy" (talking about Greece), we still have lower public debt levels than France, Italy, Germany and of course the US. We have other major problems, of course, but fiscal responsability has not been a factor in our current situation.
While its true that some of the german industries has profitted from this euromess (heavy export industries), Germany as a whole hasn't. Its actually a question of simple math:
The capital (ressources) that Germany has used to finance the spendings of other countries could have been used by its own citizens instead. The german citizens could have received tax cuts or benefitted from higher government spending which would have increased their welfare.
|
On May 25 2012 06:46 Cattivik wrote:Show nested quote +On May 25 2012 06:28 accela wrote:On May 25 2012 05:19 Cattivik wrote:On May 25 2012 05:02 CuddlyCuteKitten wrote:
I dont understand the existing shareholders part. The bank was nationalized shouldent the goverment own like 99 % or so? i mean shareholders are the owners and the bank starts to fail. To keep savers from losing everything you nationalize. I thougth that was basically the goverment forcibly feeding the bank money while diluting the shares (and getting all the new ones). That way owners lose their investments while people with money in the bank and the goverment comes out mostly unharmed. When you are shareholder of a company about to go bankrupt, what do you have to lose if the government jumps in to save it? As a shareholder you would be glad to give away your part of the cake to the government even for a really bad price. And that's the best case scenario. If the whole thing goes bankrupt you won't hold anything anyway and the government can just jump in or not. Standard procedure of insolvency is: find an investor ready to buy it up or let it land in front of a court. Since this bank will land in front of a court anyway cause noone is willing to buy it, the govt might aswell jump in before that happens and try to limit the damage. Saying the govt will come out unharmed isn't true. If the funds come from the government and not some european fund, then they are effectively paying tax money to save tax money, but probably paying more than saving, after all bank managers earn sick amounts of money and the bank most likely still has bad investitions up and running. Then they own a bank gone bad...and who's gonna buy it? Standard procedures are not so standard any more. For example greek banks are about to get 18billion euro of recapitalization that would normaly name the goverment the major shareholder easily. Instead they gonna use some exotic kind of bonds called CoCos that the government will buy and that will permit the bankers to keep the control. And of course those money add to the national debt, about +9% of GDP. Btw, since you live in Greece, of what dimensions was the recent bankrun?
You mean after the last elections since couple weeks ago? Well cant talk with numbers but there are no people waiting outside of banks to get their money or anything hardcore. It's more like the normal amount of scared citizens who quietly get some money out of the bank and keep them somewhere safe.
imo, people are much more tired than panicked right now.
|
On May 25 2012 06:46 Gaga wrote:Show nested quote +On May 25 2012 06:24 Xamo wrote:On May 23 2012 08:29 coverpunch wrote:On May 23 2012 06:00 WhiteDog wrote:
You are kidding yourself if you think banks are "helping greece" for political reasons. They are making profit out of Greece current situation, profit that is even easier to make if you take into consideration how everything that has/is happening was highly previsible. Untrue! Germany always treated the euro as more of a political union than an economic one. The rest of Europe, especially France, treated the euro as an economic thing and not a political one. The Germans wanted to present a nice face that they had moved on from their prewar ambitions. Most other Europeans wanted to get out of the thumb of the Deustchmark. The irony is that both sides ended up with exactly what they didn't want. Germany more than ever finds itself controlling Europe's economic destiny. The rest of Europe finds itself under arguably greater domination by Germany than ever before. And the solution nobody in Europe wants to hear: everyone should just be more German. The biggest problem is that Greece's problems WERE preventable. But by who? The Greeks? They would have kicked off the European Economic Crisis long ago if not for the EU's bailouts. They would be what Thailand was in 1997. The Germans? They tried but they're only going to try so hard. The rest of Europe? To varying degrees, they're as fiscally irresponsible as the Greeks. I partially disagree with you. Germany is clearly the country that has been more benefitted from the euro, because it has enabled a large increase in exports to the Eurozone. By the way, this imbalance is one of the roots of our current situation in Europe. Germans have political reasons for promoting the European Union, but the economical one is the main one for adopting the euro - EU and Eurozone are similar but not the same. Besides France and the UK, the rest of Europe understands that, in a globalized world, each country by itself will have little to no influence in global decisions, so there are both strong political and economical reasons to enter the EU. In France and the UK, it was more related to avoiding another war with Germany. I agree that currently they have little political interest. For me that is clearly a mistake: UK and France influence in the world is decreasing, and is going to be near to zero in 20 years, due to emerging coutries. Only the Greeks themselves would have been able to prevent their problems. More specifically, their poticians could have not lied to the rest of the EU about theis debt levels. The rest of Europe is absolutely not nearly as irresponsible as that. For example, Spain (my country) has been very disciplined in spending before 2008, at least our governments. Spanish debt was at 36% of the GDP in 2007, lower than any other large country in the developed world. After 4 years of "the worst economical crysis since 1929" plus "the largest real estate bubble explosion since xxx" plus "the worst debt crysis in Europe's since yyyy" (talking about Greece), we still have lower public debt levels than France, Italy, Germany and of course the US. We have other major problems, of course, but fiscal responsability has not been a factor in our current situation. Spains dept problem is the speed at which the dept level is rising ... not the acutal level itself thats true. And when you say germany profited from the euro that is somewhat true.... but the main reason why the German politicians do anything to keep the troubled countries paying their depts is that the germans own a big part of it. And this is is only possible to happen when you have huge trade imbalances ... meaning because germans dont buy enoughn stuff from the others, they have to pay the balance on credit... which in the long run will drive them into ruin ... and its creditor with them. all this made possible by the euro, because the value of currencies couldn't balance the problem ( otherwise german currency would be much higher and say greece muchg lower -> german goods expencive in greek, greek goods cheap in germany -> more germans buying greek stuff/doing hollliday, greeks would buy fewer BMW -> trade imbalances would be reduce)
Rising public debt levels over the last four years has been the ONLY thing that saved our country from a really deep depression - Keynes in action! Unfortunately those times have ended, but in a large portion due to the problems with Greece.
I agree with your view of the problems with trade imbalancies and the euro.
|
On May 25 2012 06:56 Hider wrote:Show nested quote +On May 25 2012 06:24 Xamo wrote:On May 23 2012 08:29 coverpunch wrote:On May 23 2012 06:00 WhiteDog wrote:
You are kidding yourself if you think banks are "helping greece" for political reasons. They are making profit out of Greece current situation, profit that is even easier to make if you take into consideration how everything that has/is happening was highly previsible. Untrue! Germany always treated the euro as more of a political union than an economic one. The rest of Europe, especially France, treated the euro as an economic thing and not a political one. The Germans wanted to present a nice face that they had moved on from their prewar ambitions. Most other Europeans wanted to get out of the thumb of the Deustchmark. The irony is that both sides ended up with exactly what they didn't want. Germany more than ever finds itself controlling Europe's economic destiny. The rest of Europe finds itself under arguably greater domination by Germany than ever before. And the solution nobody in Europe wants to hear: everyone should just be more German. The biggest problem is that Greece's problems WERE preventable. But by who? The Greeks? They would have kicked off the European Economic Crisis long ago if not for the EU's bailouts. They would be what Thailand was in 1997. The Germans? They tried but they're only going to try so hard. The rest of Europe? To varying degrees, they're as fiscally irresponsible as the Greeks. I partially disagree with you. Germany is clearly the country that has been more benefitted from the euro, because it has enabled a large increase in exports to the Eurozone. By the way, this imbalance is one of the roots of our current situation in Europe. Germans have political reasons for promoting the European Union, but the economical one is the main one for adopting the euro - EU and Eurozone are similar but not the same. Besides France and the UK, the rest of Europe understands that, in a globalized world, each country by itself will have little to no influence in global decisions, so there are both strong political and economical reasons to enter the EU. In France and the UK, it was more related to avoiding another war with Germany. I agree that currently they have little political interest. For me that is clearly a mistake: UK and France influence in the world is decreasing, and is going to be near to zero in 20 years, due to emerging coutries. Only the Greeks themselves would have been able to prevent their problems. More specifically, their poticians could have not lied to the rest of the EU about theis debt levels. The rest of Europe is absolutely not nearly as irresponsible as that. For example, Spain (my country) has been very disciplined in spending before 2008, at least our governments. Spanish debt was at 36% of the GDP in 2007, lower than any other large country in the developed world. After 4 years of "the worst economical crysis since 1929" plus "the largest real estate bubble explosion since xxx" plus "the worst debt crysis in Europe's since yyyy" (talking about Greece), we still have lower public debt levels than France, Italy, Germany and of course the US. We have other major problems, of course, but fiscal responsability has not been a factor in our current situation. While its true that some of the german industries has profitted from this euromess (heavy export industries), Germany as a whole hasn't. Its actually a question of simple math: The capital (ressources) that Germany has used to finance the spendings of other countries could have been used by its own citizens instead. The german citizens could have received tax cuts or benefitted from higher government spending which would have increased their welfare.
.. that would have lead to a higher inflation rate in Germany => increasing production costs => decreasing German productivity => decreasing exports etc.
Investing in other countries is a better solution, at least for german industries and their (rich) owners. I fully agree with you that German citizens have seen a much lower welfare increase - if any - than their GDP figures show.
|
On May 25 2012 06:24 Xamo wrote:Show nested quote +On May 23 2012 08:29 coverpunch wrote:On May 23 2012 06:00 WhiteDog wrote:
You are kidding yourself if you think banks are "helping greece" for political reasons. They are making profit out of Greece current situation, profit that is even easier to make if you take into consideration how everything that has/is happening was highly previsible. Untrue! Germany always treated the euro as more of a political union than an economic one. The rest of Europe, especially France, treated the euro as an economic thing and not a political one. The Germans wanted to present a nice face that they had moved on from their prewar ambitions. Most other Europeans wanted to get out of the thumb of the Deustchmark. The irony is that both sides ended up with exactly what they didn't want. Germany more than ever finds itself controlling Europe's economic destiny. The rest of Europe finds itself under arguably greater domination by Germany than ever before. And the solution nobody in Europe wants to hear: everyone should just be more German. The biggest problem is that Greece's problems WERE preventable. But by who? The Greeks? They would have kicked off the European Economic Crisis long ago if not for the EU's bailouts. They would be what Thailand was in 1997. The Germans? They tried but they're only going to try so hard. The rest of Europe? To varying degrees, they're as fiscally irresponsible as the Greeks. I partially disagree with you. Germany is clearly the country that has been more benefitted from the euro, because it has enabled a large increase in exports to the Eurozone. By the way, this imbalance is one of the roots of our current situation in Europe. Germans have political reasons for promoting the European Union, but the economical one is the main one for adopting the euro - EU and Eurozone are similar but not the same.
This is a good point worth expanding on. The persistent ability for Germany to export more than the country imported lead to an accumulation of money inside Germany - money that Germans themselves did not want to spend either in the business, household or government sectors (as it would mean more debt or taxes). Instead the money went to the countries that were importing more than they were exporting. In effect, countries like Germany were lending money to countries like Greece so that Greece could buy more stuff from Germany. While obviously not the only reason Greece ran into too much debt, it did exacerbate the situation.
A similar imbalance played a role in America's financial crisis as well. Many Asian countries peg their currency to the dollar in order to run persistent trade surpluses (to grow their economies). Those surpluses then get invested in dollar denominated assets (US treasuries) which then winds up as deposits at US banks. The banks then need to find a place to put all that money to work - hence home mortgages became very easy to get.
This is also what makes Greece leaving the Euro so tempting - a return to the Drachma would make it easier for Greece to export more and import less and help solve the persistent trade imbalance.
|
On May 25 2012 07:17 Xamo wrote:Show nested quote +On May 25 2012 06:56 Hider wrote:On May 25 2012 06:24 Xamo wrote:On May 23 2012 08:29 coverpunch wrote:On May 23 2012 06:00 WhiteDog wrote:
You are kidding yourself if you think banks are "helping greece" for political reasons. They are making profit out of Greece current situation, profit that is even easier to make if you take into consideration how everything that has/is happening was highly previsible. Untrue! Germany always treated the euro as more of a political union than an economic one. The rest of Europe, especially France, treated the euro as an economic thing and not a political one. The Germans wanted to present a nice face that they had moved on from their prewar ambitions. Most other Europeans wanted to get out of the thumb of the Deustchmark. The irony is that both sides ended up with exactly what they didn't want. Germany more than ever finds itself controlling Europe's economic destiny. The rest of Europe finds itself under arguably greater domination by Germany than ever before. And the solution nobody in Europe wants to hear: everyone should just be more German. The biggest problem is that Greece's problems WERE preventable. But by who? The Greeks? They would have kicked off the European Economic Crisis long ago if not for the EU's bailouts. They would be what Thailand was in 1997. The Germans? They tried but they're only going to try so hard. The rest of Europe? To varying degrees, they're as fiscally irresponsible as the Greeks. I partially disagree with you. Germany is clearly the country that has been more benefitted from the euro, because it has enabled a large increase in exports to the Eurozone. By the way, this imbalance is one of the roots of our current situation in Europe. Germans have political reasons for promoting the European Union, but the economical one is the main one for adopting the euro - EU and Eurozone are similar but not the same. Besides France and the UK, the rest of Europe understands that, in a globalized world, each country by itself will have little to no influence in global decisions, so there are both strong political and economical reasons to enter the EU. In France and the UK, it was more related to avoiding another war with Germany. I agree that currently they have little political interest. For me that is clearly a mistake: UK and France influence in the world is decreasing, and is going to be near to zero in 20 years, due to emerging coutries. Only the Greeks themselves would have been able to prevent their problems. More specifically, their poticians could have not lied to the rest of the EU about theis debt levels. The rest of Europe is absolutely not nearly as irresponsible as that. For example, Spain (my country) has been very disciplined in spending before 2008, at least our governments. Spanish debt was at 36% of the GDP in 2007, lower than any other large country in the developed world. After 4 years of "the worst economical crysis since 1929" plus "the largest real estate bubble explosion since xxx" plus "the worst debt crysis in Europe's since yyyy" (talking about Greece), we still have lower public debt levels than France, Italy, Germany and of course the US. We have other major problems, of course, but fiscal responsability has not been a factor in our current situation. While its true that some of the german industries has profitted from this euromess (heavy export industries), Germany as a whole hasn't. Its actually a question of simple math: The capital (ressources) that Germany has used to finance the spendings of other countries could have been used by its own citizens instead. The german citizens could have received tax cuts or benefitted from higher government spending which would have increased their welfare. .. that would have lead to a higher inflation rate in Germany => increasing production costs => decreasing German productivity => decreasing exports etc. Investing in other countries is a better solution, at least for german industries and their (rich) owners. I fully agree with you that German citizens have seen a much lower welfare increase - if any - than their GDP figures show.
Say you have 10$. Would you rather A) Give it to someone else who demands that you work for 1 hour before he returns 5 of the 10$ back to you?
Use the 10$ to buy whatever you want? And use that 1 hour in whatever way you would like?
In fact inflation isn't created in this proces. Inflation however is created through the target system in which Greece GIIPS countries borrow from Germany (who prints the money), however Germany isn't benefitting from this inflation. The countries who choose to spend the money are benefitting the most, while the euro as a whole will depereciate (which hurts both Germany and the GIIPS countries).
|
On May 23 2012 08:29 coverpunch wrote:
Untrue! Germany always treated the euro as more of a political union than an economic one. The rest of Europe, especially France, treated the euro as an economic thing and not a political one. The Germans wanted to present a nice face that they had moved on from their prewar ambitions. Most other Europeans wanted to get out of the thumb of the Deustchmark.
The irony is that both sides ended up with exactly what they didn't want. Germany more than ever finds itself controlling Europe's economic destiny. The rest of Europe finds itself under arguably greater domination by Germany than ever before. And the solution nobody in Europe wants to hear: everyone should just be more German.
The biggest problem is that Greece's problems WERE preventable. But by who? The Greeks? They would have kicked off the European Economic Crisis long ago if not for the EU's bailouts. They would be what Thailand was in 1997. The Germans? They tried but they're only going to try so hard. The rest of Europe? To varying degrees, they're as fiscally irresponsible as the Greeks.
I put a response in spoiler tags, because I want to make a more important point:
+ Show Spoiler +Well, this is only partially true. Germany was fully aware at the time Italy joined that it would lead to economical drama. Only, at the time Germany could not say anything about it, because they had a hard time with their own economy. And of course, you are right that politically Germany really could not speak up against Italy, since Italy is one of the biggest, and most loyal supporters of the EU. After Italy joined there was no case to reject other countries.
As for calling other countries as fiscally irresponsible at the Greek. Sorry, but that is just not true. For example, the Netherlands has a smaller debt than Germany. As for other countries should run their economy like Germany. That is not exactly the problem here. The problem is that the German economy and industry is complete different compared to the Greek industry. Germany sells expensive products, so if the Euro is strong they don't can cheaply import materials they need for their industry.
Greece, and Italy need a weaker Euro, because they need to export cheaper products with much higher competition. Also, countries like Italy and I think Spain as well have been at the 120% points for decades and whenever there was trouble they could just print more money. But now they can't, they have lost this control over their own economies.
I think the current "crisis" is actually deliberately sustained to move to a more powerful EU faster while making it impossible for the citizens in individual countries to vote against it. It is the oldest trick in the book, rule with fear. In this case, fear of complete economic collapse. Think about it, a couple of years ago it was very clear that individual countries like Ireland, the Netherlands, etc. were having referendums that would limit the growth of power in the EU. Now with the crisis the citizens are shut up, we don't get a vote anymore in any of this. We just need to follow, or our world will come to an end.
And this power from the EU works in many directions. First, it forces northern countries to send huge amounts of their wealth to the south, so that the level of wealth is more leveled. Second, it forces southern countries to make very harsh reforms very fast, so their economies will be more aligned with northern countries in the end. Third, and most importantly, the EU has seen an incredible increase in power in the last year, and will see an increasing growth of power in the coming years. which is exactly the goal of the EU in the end, to take away the freedoms of individual countries until they are nothing more than states are in the USA. This growth in power would have been impossible if they actually would have allowed citizens to vote, but by sustaining the crisis, they can implement the EU much faster.
|
On May 25 2012 07:09 Xamo wrote:Show nested quote +On May 25 2012 06:46 Gaga wrote:On May 25 2012 06:24 Xamo wrote:On May 23 2012 08:29 coverpunch wrote:On May 23 2012 06:00 WhiteDog wrote:
You are kidding yourself if you think banks are "helping greece" for political reasons. They are making profit out of Greece current situation, profit that is even easier to make if you take into consideration how everything that has/is happening was highly previsible. Untrue! Germany always treated the euro as more of a political union than an economic one. The rest of Europe, especially France, treated the euro as an economic thing and not a political one. The Germans wanted to present a nice face that they had moved on from their prewar ambitions. Most other Europeans wanted to get out of the thumb of the Deustchmark. The irony is that both sides ended up with exactly what they didn't want. Germany more than ever finds itself controlling Europe's economic destiny. The rest of Europe finds itself under arguably greater domination by Germany than ever before. And the solution nobody in Europe wants to hear: everyone should just be more German. The biggest problem is that Greece's problems WERE preventable. But by who? The Greeks? They would have kicked off the European Economic Crisis long ago if not for the EU's bailouts. They would be what Thailand was in 1997. The Germans? They tried but they're only going to try so hard. The rest of Europe? To varying degrees, they're as fiscally irresponsible as the Greeks. I partially disagree with you. Germany is clearly the country that has been more benefitted from the euro, because it has enabled a large increase in exports to the Eurozone. By the way, this imbalance is one of the roots of our current situation in Europe. Germans have political reasons for promoting the European Union, but the economical one is the main one for adopting the euro - EU and Eurozone are similar but not the same. Besides France and the UK, the rest of Europe understands that, in a globalized world, each country by itself will have little to no influence in global decisions, so there are both strong political and economical reasons to enter the EU. In France and the UK, it was more related to avoiding another war with Germany. I agree that currently they have little political interest. For me that is clearly a mistake: UK and France influence in the world is decreasing, and is going to be near to zero in 20 years, due to emerging coutries. Only the Greeks themselves would have been able to prevent their problems. More specifically, their poticians could have not lied to the rest of the EU about theis debt levels. The rest of Europe is absolutely not nearly as irresponsible as that. For example, Spain (my country) has been very disciplined in spending before 2008, at least our governments. Spanish debt was at 36% of the GDP in 2007, lower than any other large country in the developed world. After 4 years of "the worst economical crysis since 1929" plus "the largest real estate bubble explosion since xxx" plus "the worst debt crysis in Europe's since yyyy" (talking about Greece), we still have lower public debt levels than France, Italy, Germany and of course the US. We have other major problems, of course, but fiscal responsability has not been a factor in our current situation. Spains dept problem is the speed at which the dept level is rising ... not the acutal level itself thats true. And when you say germany profited from the euro that is somewhat true.... but the main reason why the German politicians do anything to keep the troubled countries paying their depts is that the germans own a big part of it. And this is is only possible to happen when you have huge trade imbalances ... meaning because germans dont buy enoughn stuff from the others, they have to pay the balance on credit... which in the long run will drive them into ruin ... and its creditor with them. all this made possible by the euro, because the value of currencies couldn't balance the problem ( otherwise german currency would be much higher and say greece muchg lower -> german goods expencive in greek, greek goods cheap in germany -> more germans buying greek stuff/doing hollliday, greeks would buy fewer BMW -> trade imbalances would be reduce) Rising public debt levels over the last four years has been the ONLY thing that saved our country from a really deep depression - Keynes in action! Unfortunately those times have ended, but in a large portion due to the problems with Greece. I agree with your view of the problems with trade imbalancies and the euro.
The real problem is that the economic policy most people have when they invest throught public debt is not keynesian.
Keynes idea was that public policy should be countercyclical. So, for Keynes, in a crisis the state should lower the tax (or just don't touch it) and use the debt to invest more, stimulating the economy through the keynesian multiplicator. But, in a situation of economical expansion, the tax and the public spending should be controlled in order to lower or just erase the debt. Today, even in period of economical growth, politician lower the tax and don't erase the debt.
Also, Keynes theory only work in closed economy. But Europe is a free trade community. One country investing in europe will only result in monetary flux.
Here is an exemple : when the subprime crisis appeared, most country and rich people stopped their investment. The investment rate decreased by a lot, and at the same time the economy of Germany loss a lot : because Germany, as one of the only country of the Europe with a positiv commercial balance, was gaining from Greek or Spanish public investment. It also explain why, after the crisis, Germany is the country that had the greatest recovery : they benefit from every investment made in Europe. This is why economist like Krugman nowadays ask for a different Europe, what we need is redistribution of the money within the Europe.
|
CuddlyCuteKitten Sweden. May 25 2012 05:02. Posts 1088
PM Profile Report Quote
I dont understand the existing shareholders part. The bank was nationalized shouldent the goverment own like 99 % or so? i mean shareholders are the owners and the bank starts to fail. To keep savers from losing everything you nationalize. I thougth that was basically the goverment forcibly feeding the bank money while diluting the shares (and getting all the new ones).
Yes, you would expect that to happen.
All current shares go to 0 and the government gets them all in exchange for the extra capital they give to help the bank stay alive.
The bank goes bankrupt and existing shareholders loose there monney,thats how capitalism is supposed to work.
Somehow with banks though existing shareholders seem to be able to escape complete distaster and their shares still hold value.
Not sure how this is possible.
Maybe the bank only failed for 50% lol,
Corporations often emit extra shares if they need extra capital, the old shares then still hold value only they now have to share the ownership with the new shares.
Maybe thats what happend to bankia, though i also did expect a complete takeover by the state giving it 100% ownership.
|
On May 25 2012 19:05 WhiteDog wrote:Show nested quote +On May 25 2012 07:09 Xamo wrote:On May 25 2012 06:46 Gaga wrote:On May 25 2012 06:24 Xamo wrote:On May 23 2012 08:29 coverpunch wrote:On May 23 2012 06:00 WhiteDog wrote:
You are kidding yourself if you think banks are "helping greece" for political reasons. They are making profit out of Greece current situation, profit that is even easier to make if you take into consideration how everything that has/is happening was highly previsible. Untrue! Germany always treated the euro as more of a political union than an economic one. The rest of Europe, especially France, treated the euro as an economic thing and not a political one. The Germans wanted to present a nice face that they had moved on from their prewar ambitions. Most other Europeans wanted to get out of the thumb of the Deustchmark. The irony is that both sides ended up with exactly what they didn't want. Germany more than ever finds itself controlling Europe's economic destiny. The rest of Europe finds itself under arguably greater domination by Germany than ever before. And the solution nobody in Europe wants to hear: everyone should just be more German. The biggest problem is that Greece's problems WERE preventable. But by who? The Greeks? They would have kicked off the European Economic Crisis long ago if not for the EU's bailouts. They would be what Thailand was in 1997. The Germans? They tried but they're only going to try so hard. The rest of Europe? To varying degrees, they're as fiscally irresponsible as the Greeks. I partially disagree with you. Germany is clearly the country that has been more benefitted from the euro, because it has enabled a large increase in exports to the Eurozone. By the way, this imbalance is one of the roots of our current situation in Europe. Germans have political reasons for promoting the European Union, but the economical one is the main one for adopting the euro - EU and Eurozone are similar but not the same. Besides France and the UK, the rest of Europe understands that, in a globalized world, each country by itself will have little to no influence in global decisions, so there are both strong political and economical reasons to enter the EU. In France and the UK, it was more related to avoiding another war with Germany. I agree that currently they have little political interest. For me that is clearly a mistake: UK and France influence in the world is decreasing, and is going to be near to zero in 20 years, due to emerging coutries. Only the Greeks themselves would have been able to prevent their problems. More specifically, their poticians could have not lied to the rest of the EU about theis debt levels. The rest of Europe is absolutely not nearly as irresponsible as that. For example, Spain (my country) has been very disciplined in spending before 2008, at least our governments. Spanish debt was at 36% of the GDP in 2007, lower than any other large country in the developed world. After 4 years of "the worst economical crysis since 1929" plus "the largest real estate bubble explosion since xxx" plus "the worst debt crysis in Europe's since yyyy" (talking about Greece), we still have lower public debt levels than France, Italy, Germany and of course the US. We have other major problems, of course, but fiscal responsability has not been a factor in our current situation. Spains dept problem is the speed at which the dept level is rising ... not the acutal level itself thats true. And when you say germany profited from the euro that is somewhat true.... but the main reason why the German politicians do anything to keep the troubled countries paying their depts is that the germans own a big part of it. And this is is only possible to happen when you have huge trade imbalances ... meaning because germans dont buy enoughn stuff from the others, they have to pay the balance on credit... which in the long run will drive them into ruin ... and its creditor with them. all this made possible by the euro, because the value of currencies couldn't balance the problem ( otherwise german currency would be much higher and say greece muchg lower -> german goods expencive in greek, greek goods cheap in germany -> more germans buying greek stuff/doing hollliday, greeks would buy fewer BMW -> trade imbalances would be reduce) Rising public debt levels over the last four years has been the ONLY thing that saved our country from a really deep depression - Keynes in action! Unfortunately those times have ended, but in a large portion due to the problems with Greece. I agree with your view of the problems with trade imbalancies and the euro. The real problem is that the economic policy most people have when they invest throught public debt is not keynesian. Keynes idea was that public policy should be countercyclical. So, for Keynes, in a crisis the state should lower the tax (or just don't touch it) and use the debt to invest more, stimulating the economy through the keynesian multiplicator. But, in a situation of economical expansion, the tax and the public spending should be controlled in order to lower or just erase the debt. Today, even in period of economical growth, politician lower the tax and don't erase the debt. Also, Keynes theory only work in closed economy. But Europe is a free trade community. One country investing in europe will only result in monetary flux. Here is an exemple : when the subprime crisis appeared, most country and rich people stopped their investment. The investment rate decreased by a lot, and at the same time the economy of Germany loss a lot : because Germany, as one of the only country of the Europe with a positiv commercial balance, was gaining from Greek or Spanish public investment. It also explain why, after the crisis, Germany is the country that had the greatest recovery : they benefit from every investment made in Europe. This is why economist like Krugman nowadays ask for a different Europe, what we need is redistribution of the money within the Europe.
I do not think Keynes is as relevant in this situation. Many european countries have very high debt ironically build in good times. Now it seems wrong to go for stimulating economy since it has already been done in the positive times.
I think that most of the growth in europe will have to come from Germany and even then it will be a slow recovery. Germany will start growth-talks in EU as soon as Merkel has been slaughtered in the next german election and SPD takes over. Actually a lot seems to depend on Piraten since they are getting a lot of votes in the regions, but economic policy is not their primary target afaik.
|
The growth will have to come from the southern countrys coming years.
Germany will have to grow a bit less, so that the southern countrys can grow a bit more.
To achieve this some inflation has to happen in germany, so that german products get a bit more expensive in relation to the products from the southern eurozone.
German products have been to cheap past years.
(artificially, due to the euro wich made german currency relativly weaker and southern currency relativly stronger)
(well this is what politicians say)
@ cattavik: was i wrong with my answer on your question previous page? you didnt respond annymore.
|
On May 25 2012 21:31 radiatoren wrote:Show nested quote +On May 25 2012 19:05 WhiteDog wrote:On May 25 2012 07:09 Xamo wrote:On May 25 2012 06:46 Gaga wrote:On May 25 2012 06:24 Xamo wrote:On May 23 2012 08:29 coverpunch wrote:On May 23 2012 06:00 WhiteDog wrote:
You are kidding yourself if you think banks are "helping greece" for political reasons. They are making profit out of Greece current situation, profit that is even easier to make if you take into consideration how everything that has/is happening was highly previsible. Untrue! Germany always treated the euro as more of a political union than an economic one. The rest of Europe, especially France, treated the euro as an economic thing and not a political one. The Germans wanted to present a nice face that they had moved on from their prewar ambitions. Most other Europeans wanted to get out of the thumb of the Deustchmark. The irony is that both sides ended up with exactly what they didn't want. Germany more than ever finds itself controlling Europe's economic destiny. The rest of Europe finds itself under arguably greater domination by Germany than ever before. And the solution nobody in Europe wants to hear: everyone should just be more German. The biggest problem is that Greece's problems WERE preventable. But by who? The Greeks? They would have kicked off the European Economic Crisis long ago if not for the EU's bailouts. They would be what Thailand was in 1997. The Germans? They tried but they're only going to try so hard. The rest of Europe? To varying degrees, they're as fiscally irresponsible as the Greeks. I partially disagree with you. Germany is clearly the country that has been more benefitted from the euro, because it has enabled a large increase in exports to the Eurozone. By the way, this imbalance is one of the roots of our current situation in Europe. Germans have political reasons for promoting the European Union, but the economical one is the main one for adopting the euro - EU and Eurozone are similar but not the same. Besides France and the UK, the rest of Europe understands that, in a globalized world, each country by itself will have little to no influence in global decisions, so there are both strong political and economical reasons to enter the EU. In France and the UK, it was more related to avoiding another war with Germany. I agree that currently they have little political interest. For me that is clearly a mistake: UK and France influence in the world is decreasing, and is going to be near to zero in 20 years, due to emerging coutries. Only the Greeks themselves would have been able to prevent their problems. More specifically, their poticians could have not lied to the rest of the EU about theis debt levels. The rest of Europe is absolutely not nearly as irresponsible as that. For example, Spain (my country) has been very disciplined in spending before 2008, at least our governments. Spanish debt was at 36% of the GDP in 2007, lower than any other large country in the developed world. After 4 years of "the worst economical crysis since 1929" plus "the largest real estate bubble explosion since xxx" plus "the worst debt crysis in Europe's since yyyy" (talking about Greece), we still have lower public debt levels than France, Italy, Germany and of course the US. We have other major problems, of course, but fiscal responsability has not been a factor in our current situation. Spains dept problem is the speed at which the dept level is rising ... not the acutal level itself thats true. And when you say germany profited from the euro that is somewhat true.... but the main reason why the German politicians do anything to keep the troubled countries paying their depts is that the germans own a big part of it. And this is is only possible to happen when you have huge trade imbalances ... meaning because germans dont buy enoughn stuff from the others, they have to pay the balance on credit... which in the long run will drive them into ruin ... and its creditor with them. all this made possible by the euro, because the value of currencies couldn't balance the problem ( otherwise german currency would be much higher and say greece muchg lower -> german goods expencive in greek, greek goods cheap in germany -> more germans buying greek stuff/doing hollliday, greeks would buy fewer BMW -> trade imbalances would be reduce) Rising public debt levels over the last four years has been the ONLY thing that saved our country from a really deep depression - Keynes in action! Unfortunately those times have ended, but in a large portion due to the problems with Greece. I agree with your view of the problems with trade imbalancies and the euro. The real problem is that the economic policy most people have when they invest throught public debt is not keynesian. Keynes idea was that public policy should be countercyclical. So, for Keynes, in a crisis the state should lower the tax (or just don't touch it) and use the debt to invest more, stimulating the economy through the keynesian multiplicator. But, in a situation of economical expansion, the tax and the public spending should be controlled in order to lower or just erase the debt. Today, even in period of economical growth, politician lower the tax and don't erase the debt. Also, Keynes theory only work in closed economy. But Europe is a free trade community. One country investing in europe will only result in monetary flux. Here is an exemple : when the subprime crisis appeared, most country and rich people stopped their investment. The investment rate decreased by a lot, and at the same time the economy of Germany loss a lot : because Germany, as one of the only country of the Europe with a positiv commercial balance, was gaining from Greek or Spanish public investment. It also explain why, after the crisis, Germany is the country that had the greatest recovery : they benefit from every investment made in Europe. This is why economist like Krugman nowadays ask for a different Europe, what we need is redistribution of the money within the Europe. I do not think Keynes is as relevant in this situation. Many european countries have very high debt ironically build in good times. Now it seems wrong to go for stimulating economy since it has already been done in the positive times. I think that most of the growth in europe will have to come from Germany and even then it will be a slow recovery. Germany will start growth-talks in EU as soon as Merkel has been slaughtered in the next german election and SPD takes over. Actually a lot seems to depend on Piraten since they are getting a lot of votes in the regions, but economic policy is not their primary target afaik.
The problem is that Germany can only sustain decent growth rates if they can maintain good export growth (which previosuly has been possible given that they share the same currency as spain, france, italy). However most likely german wages will rise relative to the wages from SFI, and hence I think we can estimate that Germany will have a harder time in the future by accomplishing decent GDP growth.
|
On May 23 2012 08:25 Rassy wrote:
Well as a bank you could lend monney from the ecb at 1% interest under their Ltro.
The ecb requires a colleteral for this loan but the good thing is that they accept nearly anny colleteral (as long as its european).
So the banks can buy the greek bond giving them 5% interest and use thoose as a collateral to lend the same amount at 1% from the ecb.
The difference is pure profit for the bank, no initial investment is needed.
Yes, that would be a way of getting a profit.
But since all of that profit stands on the active side of the balance of accounts (look for an article describing it in detail if you don't know the standard), the bonds as capital assets and the interest rates from the bonds as claims, speculating against a bankruptcy of a country like Greece, it's just an illusionary profit for the short term.
If the bonds default, the bank loses the amount of money for the bonds in the capital assets - the interest rates they earned over time + the interest rate they had to pay back to the ECB.
They're just buying time and throwing money down a hole.Even if Greece doesn't default, something is bound to happen, their bonds interest rates are skyrocketing upwards, the german bonds downwards.
It's either gonna be another massive amount of billions of € or the declaration of bankruptcy and exit from eurozone.
On May 23 2012 08:25 Rassy wrote:
There are some strings attached though.
What if greece (and other southern european countrys) dont pay back the new bunds?
Well that should be no problem for the bank, i asume they can just default their debt to the ecb and not get back their collateral.
The ecb now holds all the debt and the ecb never has to write down on its debt !
(debt to the ecb was the only debt excluded from the greek debt deal and it still has to be repaid 100%)
The banks also made (and probably lost) monney on making bets against or in favour of greece on the financial markets
though i think this is not what you meant.
Defaulting the debt appears in the balance of accounts as a diminuition of capital.
So even if the ECB doesn't care about the interest, the bank gets in trouble.
And the money from that default doesn't just disappear, it's in circulation and counts as money supply.
Doesn't automatically lead to inflation, we don't know what Greece is using that money for, oh wait, it just supported a bank a few days ago. Then you can be sure that that money won't lead to consumer price inflation since it won't reach any consumers.
It might lead to asset inflation cause the bank reinvests it into resources or shares or whatever, or it might be used to pay debts to other banks.
Or they might buy Greek bonds.
Bets against/for Greece are a huge question mark, there was already a wave of CDS being paid out when they cut some % of Greek debt.
That didn't seem to be a bigger problem for the involved parties.
Now i wonder what bets are going on on the credit derivate market.
What i know is that noone is gonna get CDS for Greek bonds now, and that is a good sign of how the majority of the markets thinks about Greece, they don't wanna cover you against their default.
For the credit derivate market concerning Greece it's hard to tell if there's a timebomb or a fart. Depends on the banks involved and their positions + the amount of capital.
On May 23 2012 08:25 Rassy wrote:The banks had to write of 80% on their "old" greek debt, The banks had to get some compensation for this loss and this is how they got it. (in the end the banks didnt buy as manny european bonds as the ecb did hope, they mostly refinanced their own debts) This also was needed to re- finance the banks as they had run into huge trouble getting financing on the markets. It is a verry complicated situation and i definatly dont think i fully understand it but i do think that banks now make (well rather made, during the ltro wich is now closed) monney on buying bonds from the southern eurozone. I thought that was the idea at least, The ecb could in this way indirectly support the southern bonds,while at the same time supporting the banking industry. If i am completely wrong here btw, feel free to enlight me 
It's indeed complicated cause they are throwing in hundreds of billions left and right by snapping with their fingers.
It has become impossible to quantify how much is in circulation, you can't tell how much exactly is concerning Greece on the credit derivate market, you can't tell where the money is going. What you can look at are the banks and governments holding Greek bonds, and i posted a pdf somewhere about the banks doing so. The biggest european ones are included.
One can only guess the scenario and the involved mechanisms.
On May 25 2012 21:43 Rassy wrote:
The growth will have to come from the southern countrys coming years.
Germany will have to grow a bit less, so that the southern countrys can grow a bit more.
To achieve this some inflation has to happen in germany, so that german products get a bit more expensive in relation to the products from the southern eurozone.
German products have been to cheap past years.
(artificially, due to the euro wich made german currency relativly weaker and southern currency relativly stronger)
(well this is what politicians say)
@ cattavik: was i wrong with my answer on your question previous page? you didnt respond annymore.
I don't like the term 'growth', there are multiple ways to quantify it and the way of using it without a quantification makes it more of a catchphrase than a real thing.
I'm not an expert on macroeconomic mathematics, so if someone knows how growth should be calculated, he's free to post.
How do you want to cause inflation in Germany but not in the southern zones when they share the same currency?
No, you weren't wrong. Actually, noone is right, don't believe anything anyone says, make an opinion for yourself, since predicting things to come is impossible anyway. There is no way to get to a really true answer.
|
|
|
|
|
|
EPT
