_w_
-
Posts
6,627 -
Joined
-
Last visited
Content Type
Profiles
Forums
Events
Posts posted by _w_
-
-
Not just because they benefit from being tied to the currency themselves (a separate DM would rise so high in value in turbulent times that they'd struggle to sell anything)
This is such an oft repeated misconception. People forget the inflation / devaluation circle jerk increases the amount of devalued currency in circulation. Each drachma or Lira may be worth fewer deutsch marks but their number is increased (it's the original reason for the devaluation): the overall purchasing power of the inflating country is not reduced. All it does is redistribute the wealth around in favour of people who know how to benefit from inflation.
In other words, the greeks would have drachmas worth less than euros but would have more of them to keep buying BMWs in aggregate.
-
somewhat Bearish article there
Yes, A* for drama and fictional creativity.
You'd think the DT had turned into the propaganda arm of a government desperate for Europe to inflate...
-
'its different this time'.
Quite the opposite. Some bull and bear markets have lasted for eons.
The emprical data you refer to is mostly non existant IMO, usually the result of people trying to identify patterns in seemingly chaotic data (we are wired to find patterns and will always find some, it's an evolutionary trait). The mistake is trying to find endogenous factors for price behaviour when those factors are perhaps always exogenous. A one hundred year war will give you a one hundred year commodity bull market, a four year war a four year bull market, that is empirical data, not identified patterns on charts.
Some deflationary phases in middle age Europe or at the time of the Roman Empire lasted for centuries. Bonds or their equivalent were a very good investment for the duration, possibly the longest bull market in history. To assume there is fixed time span or preset price range for trends is ignoring real world factors and in my limited experience, it is always a costly mistake.
Anyway, I am not supporting bonds as an investment, you've got the wrong idea. I find the article interesting because of the nature of the analysis and the duration of the investments covered. I didn't post it to suggest people should invest in bonds, that's the last thing I'd do: too risky for me and I generally don't like investments that guarantee a non return _of_ capital after inflation.
-
Ok so just massive capital flight then and the only way of stopping it is to make it more attractive to stay by raising rates.
While printing because even with raised rates no aside from captured insurance and pension funds would want to buy those bonds, yes.
This assumes investors are given an alternative which is a big if. Since the 1920s western CBs have been on the whole quite good at coordinating their actions to suppress the devaluation signals and alternatives. We also never had such a need to inflate as now.
-
The very fact that government bonds have been the best performing asset class over the last 30 years is the very reason to avoid them like the plague.
Thinking this is the mistake I made immediately upon reading the piece.
Basing your view of the situation on duration of a bull/bear market and current price is very tempting but wrong. Sometimes price doesn't matter, exogenous events only cause trend changes. I'm beginning to think that this might apply all the time.
-
An overpriced workforce then.
Yes, and those supposedly in charge let them overprice themselves for the sake of a few votes at the next election. Knowing full well that there would be hell to pay at some stage.
-
Enough of those videos of yours already. When it comes to borrowing that which you know you won't repay, I see only looting.
What videos? Looting to me brings up swords, hairy guys and raped virgins. It must be me...
-
What comes after junk status if they cut again?
AAA IIRC.
-
A lot of discussions revolve around gold's long term returns vs. other asset classes. This is not about gold but it fits in quite well with the topic.
http://www.zerohedge.com/contributed/bond-bull-sees-more-deflation-ahead
I was prompted to write this comment by the fact that, through Q3 of this year, the total return performance of long-term Treasury bonds has exceeded the performance of the stock market for the trailing 30-year period that began in 1981. I began my career as an “Account Executive” at Merrill Lynch in 1977 when brokers were leaving the business to drive taxicabs. It is a bit startling to think that the “benchmark risk-free long term asset” has won the race for practically the whole time.
...
More at the link
-
Who bond buyers or people who invest in the UK.
Everyone.
Edit: Every investor. All your left with are the fast speculators who don't buy bonds anyway.
-
The Bank of England itself is one of the biggest obstacles to low inflation in Britain, former rate-setter Andrew Sentance has claimed.
There is one set of people more careless about inflation than central banks: politicians.
-
Ermmm... it was only Crash Himself that put in place the masquerade of political neutrality.
http://en.wikipedia....olicy_Committee
Rates since MPC inception:
Inflation since MPC inception:
Fail in action.
I think you're saying Brown started it?
-
Isn't they why Gilt yields are so low at the moment.
I'm struggling to see why the BOE would need to raise rates even if Gilt's spiked, they could just print. The only reason i see would be to defend Sterling.
You give people one inkling of a signal that there is an alternative to losing 3%++ a year guaranteed on gilts and they will rush for the alternative.
-
Good answer, but surely the problem at the moment is that the euro is not percieved as being safe?
Yes indeed but a bit longer term than the next few weeks or so... The only problem is the banks' perma-insolvency, how are they going to handle that. But on the sovereign side of things the problems are rather tame.
-
The Irish tiger bites back?
The Irish tiger ... meow.
-
They have an overvalued currency for a start.
No they don't.
-
Wasnt Rome part of cub Med when it looted Gaul? Or how about the Spaniards looting South American gold?
There's looting and there's sucking.
-
Of course they are. The "Private good, public bad" (or vice versa) brigade over-simplify it. And yes, it stops what you correctly call the appropriate targeting of anger.
Which I suspect it's supposed to...
+1
-
It's how Protestantism came into being. The Germanic Kings in the north were sick of paying the Latin Church for access to God and Heaven. Suddenly a more appealing (and cheaper) alternative was on offer.
The European Union is merely the modern day manifestation of the the finances of the Holy Roman Empire.
[/erranta off]
That's an intriguing parallel.
-
Close economic scrutiny? The Greeks are stealing every penny lent to them in plain view of the IMF and EU officials. Think Italy will be different?
These countries have leaders that rob, they don't care about rules, just so long as the next tranche comes through they will say or promise whatever they need to in order to steal the money. I think enough people realise this now and know Eurobonds are only a means by which even more money can be stolen.
And if they do issue them, it won't do anything to save the eurozone, how can it?
You sound as though Club Med countries have a generic pre-condition that would stop them from being financially sound. Look at the history of these countries, every single one of them was at one time or another a world shaper. The current situation, the pervasive political corruption and impact on the rest of the population does not have to be permanent. It would take time but it can be changed.
-
Don't think you made that clear at all TMT.
Who says the rates have risen (see below)? Their situation is analogous to ours: if necessary the Germans can print* buy**. What they don't seem willing to do is let the ECB print. That's the crucial point. That means peripherals will struggle to raise debt. That opens the prospect of widespread default. That opens the prospect of bank losses, and that could lift LIBOR (even further - remember it hit 6.3% in sept 2008), and that is what is crucial for mortgaes / savings rates.
Three-month sterling LIBOR over the past two years SOURCE: BLOOMBERG
Of course, none of this addresses the fact that the Bundesbank felt the need to wade into their own country debt auctions at twice the usual percentage. Why did bids collapse? If Germany can print (and they can and they did) why shun German debt (as opposed to UK debt)? Even if the euro implodes, one would conclude that Bunds would pay out in deutchsemarks; hardly a disaster!
Maybe, quite contray to most commentary, what this is saying, is that the market is worried Germany WILL assume the debts of the periphery and that the euro's future is, quite contrary to expectations, assured. Or maybe all it means is that Bunds are overbought and, for that technical reason, no longer represent a risk-off trade.
____________
*sorry, my bad
** there is a debate going on about what constitutes "printing". As we all know banks "create" money in any case. Just what form of "creation" the Bundesbank could adopt if push comes to shove is a matter up for debate.
http://www.zerohedge.com/news/revisiting-todays-failed-bund-auction-less-meets-eye
Revisiting Today's "Failed" Bund Auction: Less Than Meets The Eye
In the aftermath of today's so-called failed 10 Year Bund auction, the number of explanations seeking to goal seek some preconceived theory as to what happened has soared with justifications ranging from the amusing to the bizarre to the outright ridiculous. Here is the bottom line: "failed" Bund auctions, in which the Buba (Bundesbank or the German monetary authority) steps in to "retain" an unbid for amount and hit a maximum issuance happen all the time. In fact literally all the time as the inset chart shows. Such is the Buba charter - some European countries fail to issue the maximum amount (such as Spain and Italy in the past week), others see the central banks filling the demand. This has nothing to do with implicit or explicit monetization (because if it did then every Primary Dealer takedown in a US Treasury auction would also constitute monetization), or with some opaque negative repo prevention scheme (incidentally negative repo rate in the US bond market happen all the time - see here for instances in just the last week). It has everything to do with lack of demand at a given price. Nothing more, nothing less. And while it is intriguing to fabricate complex theories about broken secondary conduits or what have you, the explanation is far simpler. As SocGen puts it: "The fact that the Buba was forced to retain the biggest share of the sale in recent memory (see chart) is clearly a sign that some investors are no longer showing up or have started to buy considerably less, preferring other fixed income or alternative safe havens." No need to conceive an explanation where simply supply and demand will suffice. And in this case there was not enough demand at prevailing yields. And that in itself is the most ominous explanation because as SocGen concludes, "certain investors are starting to overlook the eurozone altogether". Lastly, for those who look at things only from a theoretical standpoint and forget there is an actual market, the direct implication is that Euro Country X spreads to Bunds just collapsed. And presto - with one "failed auction, European periphery, and that now includes France, Balgium and Austria, all suddenly look much better. Never waste a crisis...
Full note from SocGen:
German ‘safe haven’ status under review?There were reports last week that investors in Asia were starting to reassess their exposure to the core eurozone debt markets after already having pulled their horns in on the periphery. Though such stories can be difficult to verify, the results of recent eurozone bond auctions clearly show that confidence has started to flag, even in German Bunds.
The EUR6bn, 10y sale drew bids of just 1.07 times the amount on offer if the Bundesbank’s part of EUR2.356bn is left out. This participation rate is among the lowest since the inception of the EUR in 1999 (see chart above). The fact that the Buba was forced to retain the biggest share of the sale in recent memory (see inset chart) is clearly a sign that some investors are no longer showing up or have started to buy considerably less, preferring other fixed income or alternative safe havens.Auctions can be subject to technical considerations that include hedging of existing exposure or the execution of relative strategy ideas; however, the statistics that accompany this morning’s 10y Bund auction do not make for pretty reading and are a reason for concern as certain investors are starting to overlook the eurozone altogether.The argument that yields have fallen too low does not stack up if one considers the levels of 10y gilts and USTs. The gilt/Bund spread collapsed to below 10bp today from 50bp a few weeks ago. The UST/bund spread plummeted to -16bp. EU 10y swaps spreads are down 10bp at 58bp after being down to 51bp earlier.The political rhetoric from the EU leaders as well as uncertainty attributable to Treaty changes and dangers from rising contingent liabilities for the AAA nations have obviously been detrimental to investor confidence both in the eurozone and overseas.Insofar as the contagion has recently spread from the periphery to the core, auctions like the one this morning could cause fear to escalate that, after France, markets are also starting to doubt the position of Germany as funding pressures continue to mount. With the EU summit only two weeks away, this should be a reminder to EU leaders and policymakers that political transition and austerity alone will not stop the cost of the sovereign debt crisis from escalating until a firewall is put into place. -
Did she go into any detail why?
Once the panic subsides in Europe (if it does) the UK would experience a flight of capital to Europe. Higher interest rates and healthier economic prospects would prove irresistible for capital looking for safe heavens. What would remain in the UK would be the speculating hot money to play the inflation game. That would likely force us to raise rates (which isn't sure now that the government makes monetary policy decisions) as hot money has no interest in safe bonds. If we didn't we would be as vulnerable to hot money flows as your average third world country.
-
Merkel looks like she has completely won the argument at the political level. I'm not sure but Sarkozy looks like he is ready to lose his next elections, he made a mention of giving priority to protecting citizens rather than markets but I didn't get all of it.
-
Live, in French. h/t ZH
ITALY THREAD
in House prices and the economy
Posted
The rate for Itlian bonds is currently set by no one other than the ECB.
Monti went to see Merkozy asking for some freebies and easier austerity conditions. He was told to go back to his government to tell them to grow up. Wouldn't this be the incentive?