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Cost Of Insuring German Debt Is Starting To Rise

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http://www.bloomberg.com/news/2010-12-01/irish-contagion-spreads-to-less-risky-bond-markets-euro-credit.html

Sovereign Debt Losses Extend to Highest-Rated European Bonds: Euro Credit
By Lukanyo Mnyanda and Paul Dobson - Dec 1, 2010 11:43 AM GMT
Ireland’s decision on Nov. 28 to accept an 85 billion-euro bailout ($111 billion) failed to end the spread of the European debt crisis, fueling investor concern about the willingness and ability of Europe’s stronger nations to foot the price of future rescues.
Bailouts for Ireland and Greece and speculation that Portugal and Spain may need aid are prompting investors to shun some of Europe’s highest-rated bonds.
The cost of insuring German debt against default rose yesterday to the highest since May
. The yield on 10-year French securities climbed to as much as 3.247 percent, the most in more than in six months, and the extra yield, or spread, investors demand to hold 10-year Belgian bonds instead of similar-maturity German bunds climbed to the most since at least 1993.

An inevitable development. The buck will stop with Germany and they do not have the resources to bail out the EU.

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This may well be the "sleeper" biggest news of the day.

Stock markets are soaring with RBS up over 6%. There is a HUGE amount of irrational exhuberance going on at present.

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This may well be the "sleeper" biggest news of the day.

Stock markets are soaring with RBS up over 6%. There is a HUGE amount of irrational exhuberance going on at present.

Of course such as RBS are soaring. The banks have been trying to force the Eurozone to give thm lots of free money and today Trichet is talking as if he has thrown the towel in and stopped trying to fight them.

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This may well be the "sleeper" biggest news of the day.

Stock markets are soaring with RBS up over 6%. There is a HUGE amount of irrational exhuberance going on at present.

Are these rises due to the belief that the ECB are going to print and start buying up all of the EU sovereign debt?

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The market has realised Germany can't afford the rest of Europe.

The game of chicken is on. Will the Germans walk from the Euro or will the Germans eject the failed states from the Euro?

Other than that the only other hope is if the Germans force the wasteful states to accept real budgets cuts rather than the playground lets pretend variety they are currently doing ie retirement age across Europe to be harmonised to the highest age etc...

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The market has realised Germany can't afford the rest of Europe.

The game of chicken is on. Will the Germans walk from the Euro or will the Germans eject the failed states from the Euro?

Other than that the only other hope is if the Germans force the wasteful states to accept real budgets cuts rather than the playground lets pretend variety they are currently doing ie retirement age across Europe to be harmonised to the highest age etc...

To be fair to the PIGS, it would be a bit more sporting if the German people spent more money on output from the PIGS, even if their government has to do it on their behalf. Unless they do, there is simply no way in which the PIGS can repay what is owed to those German banks. Money has to circulate to work properly, when you get someone hoarding it all, everything falls apart.

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Are these rises due to the belief that the ECB are going to print and start buying up all of the EU sovereign debt?

Answering my own question, I can see the spread on the yields between the PIGS and Germany tumbling like it was all a big mistake.

Massive purchases of Sovereign bonds are afoot. How will they decide how to do it though? To do this properly you need to cancel the bonds once purchased, liberating the nation of the debt of the bond. But doing this places the cost of that action on all existing holders of Euro's, nothing is cost free.

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To be fair to the PIGS, it would be a bit more sporting if the German people spent more money on output from the PIGS, even if their government has to do it on their behalf. Unless they do, there is simply no way in which the PIGS can repay what is owed to those German banks. Money has to circulate to work properly, when you get someone hoarding it all, everything falls apart.

So they should holiday in Greece more and buy Irish property then? There's 300,000 holiday homes the Germans could purchase isn't there in the Emerald isle?

What do the PIIGS produce that the Germans need? The Germans clearly produce quite a lot of what the PIIGS need how can we effectively balance it out?

Every German must buy 2kg a week of Feta?

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So they should holiday in Greece more and buy Irish property then? There's 300,000 holiday homes the Germans could purchase isn't there in the Emerald isle?

What do the PIIGS produce that the Germans need? The Germans clearly produce quite a lot of what the PIIGS need how can we effectively balance it out?

Every German must buy 2kg a week of Feta?

irro,

yes, a bit of a problem deciding how to do this. I am sure that you could think of something. How about getting Spain to build a few boats, or develop a set of new trains for a high speed railway? Get Ireland to supply Germany with munitions, that sort of thing, it could be done.

An better alternative is to have separate currencies. When you dont produce anything of value, you get poorer. That can happen because the currency you use gets less valuable, or you get less of the currency. At the moment the PIGS are choosing the latter option by being in the Euro, which is making their debts unpayable.

A central European government could balance things out, just as I have described, by placing expenditure within the areas that are the poorest, just like we do in the UK by spending all that money on Scotland, Wales, NI and the NE of England, it keeps them going. A European superstate would have to do the same.

Looks to me though as they are going for monetary printing. Mr and Mrs Joseph Sechs Packen from Baden Baden wont like that.

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Answering my own question, I can see the spread on the yields between the PIGS and Germany tumbling like it was all a big mistake.

Massive purchases of Sovereign bonds are afoot. How will they decide how to do it though? To do this properly you need to cancel the bonds once purchased, liberating the nation of the debt of the bond. But doing this places the cost of that action on all existing holders of Euro's, nothing is cost free.

Printing euros and buying the PIGS debt is the politically easy solution. It's not cost free by any means.

The prospect of Germany defaulting is the same as the US defaulting on USD denominated paper (ie. nil). Of course the ECB would print to stop that ever happening.

The Germans will try to inflation-hedge somehow (if they haven't already) and then let the presses run a bit.

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A central European government could balance things out, just as I have described, by placing expenditure within the areas that are the poorest, just like we do in the UK by spending all that money on Scotland, Wales, NI and the NE of England, it keeps them going. A European superstate would have to do the same.

For over 30 years we have been shipping freshly-printed money from London to the regions, where it is used to overpay headteachers and GPs, employ pointless council busybodies, subsidise landlords, and push up the cost of living to the point where the jobs have been shipped overseas and it is better for many to live on benefits than work.

And this is a good thing?

The last thing Europe needs is a continent-wide demonstration of why government interference usually hinders real economic growth more than it helps it.

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For over 30 years we have been shipping freshly-printed money from London to the regions, where it is used to overpay headteachers and GPs, employ pointless council busybodies, subsidise landlords, and push up the cost of living to the point where the jobs have been shipped overseas and it is better for many to live on benefits than work.

And this is a good thing?

The last thing Europe needs is a continent-wide demonstration of why government interference usually hinders real economic growth more than it helps it.

Not quite the result of just the govt, big corporations have benefited hugely from these policies making small business uncompetitive so they can have bigger profit margins.

The north at some point had very viable industries but slowly over the decades (and I mean 150 years+) competitive advantage has been lost due to every slowly increasing cost of living and poor investment in new plant etc...

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Unless the Germans are prepared to change their employment laws that make it illegal to make people redundant, then the break-up of the euro is inevitable as the gulf between a bouyant Germany with and basket case mass-unemployment PIBIGS becomes so wide the German people pick up their ball and go home rather than pay to support the countries Germany has stripped of jobs.

I'll explain it like this.

You have 2 factories. One in France, one in Germany with production split evenly between the 2.

You need to reduce production by 30%.

The french factory is cheaper to run, but it's illegal to sack the German staff.

You close the french factory and open up a small plant in China. The cheap china plant now subsidises the expensive German plant.

At some point you have to cut production again. You close the chinease plant. Eventually you go bust, unable to compete with new companies based entirely in China.

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What do the PIIGS produce that the Germans need? The Germans clearly produce quite a lot of what the PIIGS need how can we effectively balance it out?

Every German must buy 2kg a week of Feta?

What a lovely idea. If only it could work.

It makes more sense to the EU than importing food from Africa - in our case runner beans from Kenya - while EU agriculture is laid waste.

Only downside I can see is the hastening of Peak Olive Oil.

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Printing euros and buying the PIGS debt is the politically easy solution. It's not cost free by any means.

The prospect of Germany defaulting is the same as the US defaulting on USD denominated paper (ie. nil). Of course the ECB would print to stop that ever happening.

The Germans will try to inflation-hedge somehow (if they haven't already) and then let the presses run a bit.

If that's what's on the cards why has the Euro shot up today - I don't get it.

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  • 311 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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