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THE GREAT BIG FAT GREEK THREAD

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So why can't many countries do this - all the debt is halved - and suddenly there is not such a great debt crisis afterall and everything is hunky dory ?

Well - I assume people would think the whole thing was a bit of a sham - although they think that already so would it make a huge difference.

I'll scratch your back if you scratch mine...

Argentina is still largely locked out of the international loan markets as a result of doing this.

A comparison can be drawn with a screw up with the Consumer Credit Act requirements in respect of loans to individuals. Loans were made to individuals which contravened that legislation and so were legally unenforceable. But the lenders said: we can't sue you for the money but we'll put it down on your credit record that you haven't repaid us. This then locks people out of getting credit in the future, at least at normal rates. It's the same for countries, you can't really make them pay legally (unless you can seize their assets overseas but that's never going to be a lot). The best way of getting them to comply is to lock them out of the international markets if they don't. Governments love to borrow so they'll do whatever they can to be allowed back in.

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Argentina is still largely locked out of the international loan markets as a result of doing this.

Ah but if EVERY country does it, then they can't ALL be locked out of the international loan markets, can they?!

BWHAHAHAHAHAHAHAHAHAHAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA!

::burp::

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Argentina is still largely locked out of the international loan markets as a result of doing this.

A comparison can be drawn with a screw up with the Consumer Credit Act requirements in respect of loans to individuals. Loans were made to individuals which contravened that legislation and so were legally unenforceable. But the lenders said: we can't sue you for the money but we'll put it down on your credit record that you haven't repaid us. This then locks people out of getting credit in the future, at least at normal rates. It's the same for countries, you can't really make them pay legally (unless you can seize their assets overseas but that's never going to be a lot). The best way of getting them to comply is to lock them out of the international markets if they don't. Governments love to borrow so they'll do whatever they can to be allowed back in.

So, as many people don't like governments borrowing on their behalf, is forcing them to default the best way to stop them doing it? Greeks refusing to pay taxes and forcing their government to default could be considered a rather noble thing to do, especially by their children and grand children.

Regarding the mark on your credit, that is all that is really needed anyway. It would certainly make lenders far more responsible/careful, including those individuals lending to banks (depositors), if there was no legal come back. In turn, this would cut the amount of credit in the system massively, which would help to prevent such a huge build up again in the future.

Ah but if EVERY country does it, then they can't ALL be locked out of the international loan markets, can they?!

BWHAHAHAHAHAHAHAHAHAHAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA!

::burp::

Exactly!

When politicians talk of coordinated action, perhaps coordinated defaults would be best?

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Exactly!

When politicians talk of coordinated action, perhaps coordinated defaults would be best?

It won't happen as the highly rated nations (eg. Germany) enjoy their low cost of funding and want to keep it that way. Danke.

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http://www.telegraph.co.uk/finance/financialcrisis/8793010/Germany-slams-stupid-US-plans-to-boost-EU-rescue-fund.html

German finance minister Wolfgang Schauble said it would be a folly to boost the EU's bail-out machinery (EFSF) beyond its €440bn lending limit by deploying leverage to up to €2 trillion, perhaps by raising funds from the European Central Bank.

"I don't understand how anyone in the European Commission can have such a stupid idea. The result would be to endanger the AAA sovereign debt ratings of other member states. It makes no sense," he said.

Mr Schauble told Washington to mind its own businesss after President Barack Obama rebuked EU leaders for failing to recapitalise banks and allowing the debt crisis to escalate to the point where it is "scaring the world".

"It's always much easier to give advice to others than to decide for yourself. I am well prepared to give advice to the US government," he said.

Harsh words indeed, did he really say stupid idea in the original German interview?

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http://www.irishtimes.com/newspaper/frontpage/2011/0928/1224304858666.html

The troika gods of the European Commission, the European Central Bank and the International Monetary Fund have looked favourably on the Irish stress tests as a winning formula for assessing risks in banking sectors in other struggling euro zone states.

The cost of bailing out the Irish banks has not increased since the March 2011 tests, the fifth attempt in more than two years to put a final bill on the banking disaster.

As a result of the purported success of the Irish tests, the Central Bank was asked to send a delegation to Athens earlier this summer to help the Greek authorities handle their own banking woes.

"We can confirm that following a request from the Bank of Greece a small team from the Central Bank of Ireland travelled twice to the Bank of Greece to share experiences gained," a Central Bank spokesman said.

The cost of the two trips, which the Central Bank declined to disclose, was shared by the Bank of Greece and the Central Bank.

The officials advised the Greeks on the process followed in the Irish tests and how the test results influenced the reconstruction of the Irish banking system around the two "pillars" of Bank of Ireland and Allied Irish Banks.

......

The subsequent Irish stress tests of the banks in March 2011 were not carried out exclusively by Central Bank officials, however. As part of their scrutiny, they called in consultants, including US asset manager BlackRock Solutions, to assess losses on the loan books of the Irish banks.

BlackRock has since been recruited by the Greek central bank to evaluate the country's banks, which would be among the losers in a default by Greece.

Excellent....

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http://www.guardian.co.uk/business/blog/2011/sep/28/european-debt-crisis-greek-bailout

7.41am: More details on the split over the Greek bailout - the Financial Times reckons that more than a third of eurozone countries now want the banking sector to take heftier losses on the Greek government bonds they hold.

On one side, the German and Dutch governments - calling for private creditors to take more pain. On the other, the French and the European Central Bank. The split threatens to unravel the €109bn bailout agreed on 21 July - before many parliaments have even voted on the plan.

The full story is here (registration required), and here's a flavour:

As many as seven of the bloc's 17 members arguing for private creditors to swallow a bigger writedown on their Greek bond holdings, according to senior European officials.

While hardliners in Germany and the Netherlands are leading the calls for more losses to be imposed on the private sector, France and the European Central Bank are fiercely resisting any such move.

"In Germany, there are the hardliners and there are the moderates," said one senior European official. "This is the hardliners' stance."

The threat of more severe haircuts on Greek debt could spook the markets, and give bank shares another pummelling.

So the happy clappy gains yesterday of the banking sector to be wiped out when faced with reality.....

Still more debt can only solve the problem.

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http://www.nytimes.com/2011/09/28/business/global/german-leader-reaffirms-backing-for-greece.html?_r=1&ref=business

But public opposition to the new tax was clear Tuesday as a small but vehement group of demonstrators clashed with police outside Parliament as lawmakers voted. In addition, thousands of public transport workers walked off the job in the latest in a series of 24-hour strikes protesting salary cuts and feared layoffs as state bodies are merged and abolished.

The tax, which will apply to 5.5 million homeowners — or about 80 percent of Greek households — will cost the average family 800 to 1,500 euros (about $1,045 to $2,041) a year, depending on the location and size of their property. With unemployment at 16 percent, and average income only about 26,000 euros, it is unclear how many households will be willing or able to pay.

So they are hoping the brown envelope economy will help pay the tax then? It's clearly going to help consumer spending in Greece.

Or does the avg income stated include some brown envelope estimates?

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Has anyone posted the details of the new Greek 'property tax' that went through today?

The level of owner occupancy in Greece is surprisingly high at 70%, what is in the UK at the moment?

Up to €16 a square metre

The tax, which has sparked outrage as 70pc of Greeks own their homes, was approved by a party line vote as more than a thousand people protested outside on the streets.

Greece, under pressure from its international creditors to plug a budget gap of more than €2bn, earlier this month announcedthe tax of up to €16 per square metre.

To help ensure collection, the tax is to be collected by power companies on their bills to clients, with electricity to be shut off for those who refuse to pay.

The finance ministry said this week that Greeks have €400bn invested in property, roughly the size of the nation's sovereign debt which is more than €350bn.

It has estimated the tax is only 0.2pc of the real value of property and was "a completely tolerable burden".

"The important thing is to meet the 2011 and 2012 budgetary targets," Finance Minister Evangelos Venizelos told the parliament ahead of the vote.

More than a thousand members of the protest group calling themselves the 'indignants' protested outside parliament and tried to breach a police cordon in front of the entrance.

Police used tear gas to disperse the demonstrators, arresting one, a source said.

The long-term unemployed will be exempt from the tax, so long as their family income is less than €12,000 a year and the value of their property does not exceed €150,000.

The finance ministry has also said the tax would not apply to state offices, embassies, religious buildings, monasteries, non-profit organisations, charities and amateur sports clubs.

http://uk.finance.yahoo.com/news/Greek-lawmakers-pass-tele-655097820.html

Use a short tape measure, declare your house is a church, sports club, non profit making helping the unemployed organisation?

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Ah but if EVERY country does it, then they can't ALL be locked out of the international loan markets, can they?!

BWHAHAHAHAHAHAHAHAHAHAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA!

::burp::

Thats exactly what I was thinking.

It won't happen as the highly rated nations (eg. Germany) enjoy their low cost of funding and want to keep it that way. Danke.

And if everyone else gets together and agrees it is the best way out ? And they are mroe than happy once the defaults are in place to be 'open' in their money markets and give a low cost of funding to all these countries.

Just how exactly could Germany do anything about ? Considering most of these countries are major trading partners it may even be in their long term interests to do so.

I have been thinking about this for along time. They will all be sitting there doing exactly the same thing. What are their options ?

(1) Mass systemic collapse. Everything goes tits up. Now whilst the very wealthy/powerful would probably cope - they would not want or like the uncertainty of this. They like their control - they are not going to give it away that easily.

(2) Mass debt rollovers for decades and decades to come. Would possibly work but it would be a huge drag on everything for a number of decades.

(3) Some cunning plan to write off a huge chunk of many nations debts across the board. Co-ordinated attempt. Private debts still exists to they still get control over the masses. They can say they have saved the World and it was a one off and it won't happen again. Start from scratch.

If you were in a position of power what would you choose ? I would definately be veering towards option 3. And I am pretty sure the IMF/ BIS/ Bildebergers etc.. have been having similar discussions for a long time already. What else do they talk about. The weather. :D

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Ah but if EVERY country does it, then they can't ALL be locked out of the international loan markets, can they?!

BWHAHAHAHAHAHAHAHAHAHAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA!

::burp::

I dont see why not. If you dont repay what you owe, you wont be able to get more credit. It doesnt matter how many do or dont pay, those that do repay will continue to get credit, and those that dont wont. Of course repaying might still cause credit problems if there are other reasons for lenders to believe that you wont continue to repay, repayment records arent everything.

So all nations could be locked out of credit markets, it is possible.

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I dont see why not. If you dont repay what you owe, you wont be able to get more credit.

I think this is proved to be historically untrue.

I would suspect that if that rule applied then no country ion earth would be able to get credit today as they probably all defaulted in one form or another in the past.

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I dont see why not. If you dont repay what you owe, you wont be able to get more credit. It doesnt matter how many do or dont pay, those that do repay will continue to get credit, and those that dont wont. Of course repaying might still cause credit problems if there are other reasons for lenders to believe that you wont continue to repay, repayment records arent everything.

So all nations could be locked out of credit markets, it is possible.

That's a pit with no bottom, until the total extinction of credit.

Why?

Because as you remove credit, prices fall.

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So all nations could be locked out of credit markets, it is possible.

Interesting hypothesis but I don't think it's possible for all / the majority of nations to be locked out of credit markets.

Such nations, if they are numerous enough, would create their own credit markets, and the banks will have to play along if they want to continue to do business in these countries. If said banks said 'no', then other banks will be found, whilst those that said 'no' would wither on the vine.

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That's a pit with no bottom, until the total extinction of credit.

Why?

Because as you remove credit, prices fall.

Interesting hypothesis but I don't think it's possible for all / the majority of nations to be locked out of credit markets.

Such nations, if they are numerous enough, would create their own credit markets, and the banks will have to play along if they want to continue to do business in these countries. If said banks said 'no', then other banks will be found, whilst those that said 'no' would wither on the vine.

I think it would probably end somewhere between the two. If there is a role for credit in a world where default is relatively natural, then so be it. If not, then that's just fine too. The market will decide in the end.

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I think this is proved to be historically untrue.

I would suspect that if that rule applied then no country ion earth would be able to get credit today as they probably all defaulted in one form or another in the past.

Well I guess I could have put it differently. You will get credit if the price you pay for it, the rate of interest, is higher than the perceived risk of you defaulting on the loan.

A big component of that is recent credit history. If you have proved untrustworthy in the past, then why would anyone trust you again?

As you point out, countries always find a way back, borrowing in small amounts at high rates of interest, which they repay, then next time, more money at a lower rate as they gradually rebuild confidence.

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Well I guess I could have put it differently. You will get credit if the price you pay for it, the rate of interest, is higher than the perceived risk of you defaulting on the loan.

A big component of that is recent credit history. If you have proved untrustworthy in the past, then why would anyone trust you again?

As you point out, countries always find a way back, borrowing in small amounts at high rates of interest, which they repay, then next time, more money at a lower rate as they gradually rebuild confidence.

Surely "countries normally just pass laws so that they are the only game in town."

Thing is, LQ is that this is the end of a global credit bubble - massive amounts of people who are going pop are doing so through systemic events which have zero to do with their own personal behaviours.

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Well I guess I could have put it differently. You will get credit if the price you pay for it, the rate of interest, is higher than the perceived risk of you defaulting on the loan.

A big component of that is recent credit history. If you have proved untrustworthy in the past, then why would anyone trust you again?

As you point out, countries always find a way back, borrowing in small amounts at high rates of interest, which they repay, then next time, more money at a lower rate as they gradually rebuild confidence.

Haven't Iceland successfully raised money recently?

I think once the investors exclusively play with other people's money and get rich on the commissions whether the investments are good or bad no one will be penalised for defaulting.

If you think about it, banker x can makes 10 loans to defaulted countries at 5% no questions asked or negotiate for a month to get 10% from one defaulted country. Since the beneficiary of the higher rate is the investor and not the banker, and the 'banker' earns ten times more in commission in the former scenario, the outcome should be predictable shouldn't it?

Edited by _w_

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Surely "countries normally just pass laws so that they are the only game in town."

Thing is, LQ is that this is the end of a global credit bubble - massive amounts of people who are going pop are doing so through systemic events which have zero to do with their own personal behaviours.

But didn't said people borrow more than they should have?

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Zerohedge end of the World article

Step Aside BBC "Trader": Head Of UniCredit Securities Predicts Imminent End Of The Eurozone And A Global Financial Apocalypse

http://www.zerohedge.com/news/step-aside-bbc-trader-head-unicredit-securities-predicts-imminent-end-eurozone-and-global-finan

Among the stunning allegations (stunning in that an atual banker dares to tell the truth) are the following: "the euro is “practically dead” and Europe faces a financial earthquake from a Greek default"... “The euro is beyond rescue”... “The only remaining question is how many days the hopeless rearguard action of European governments and the European Central Bank can keep up Greece’s spirits.”...."A Greek default will trigger an immediate “magnitude 10” earthquake across Europe."..."Holders of Greek government bonds will have to write off their entire investment, the southern European nation will stop paying salaries and pensions and automated teller machines in the country will empty “within minutes.” In other words: welcome to the Apocalypse...

But wait, there's more. From Bloomberg...

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Zerohedge end of the World article

Step Aside BBC "Trader": Head Of UniCredit Securities Predicts Imminent End Of The Eurozone And A Global Financial Apocalypse

http://www.zerohedge...nd-global-finan

I doubt very much they will default 100%. There has already been talk of being let off with circa 50% of their debt. They will just huff and puff until the other side offers a deal that they realistically think they can work their way through over the next x years. Then I imagine other countries will do the same. Then the 'rich' countries sitting with huge debt will think 'Well if they can do it why don't we just get rid of half our debt too'.

A system reset of sorts.

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And he is saying what I have been saying all along, that the banks need to be properly regulated not stigmatised or criminalised

And that the financial disaster was caused by politicians - NOT bankers.

Bankers did what they were encouraged to do and were knighted etc by grateful politicians

Now the wheels have come off the political project, bankers are being paid to be the fall guys.

:blink:

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  • 399 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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