Thursday, June 14, 2012

Bailouts make things worse

The more eurozone bailouts there are, the worse it will get

Because bailout funds are preferred creditors, if a sovereign is bailed out, then any private debt holder foolish enough to stay involved has to take a more concentrated share of the loss. This pushes up borrowing costs effectively the bailout has made the situation worse.

Posted by stillthinking @ 03:08 AM (1136 views)
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3 thoughts on “Bailouts make things worse

  • Interesting Guardian article today:

    “Analysis by Credit Suisse estimates that up to 58% of the value of Europe’s banks could be wiped out by the departure of the ‘peripheral’ countries”.

    A public and detailed analysis preparing for a possible Grexit. Credit Agricole went public on their plans yesterday (reuters).

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  • good article. It’s clear that “bailout” is a misnomer; you don’t bail someone out by lending them more. So-called bailouts are used to pay off private bondholders at taxpayers’ expense, transferring a larger problem to the public sector. Everyone loses apart from the existing bondholders. When there is finally a default it is the taxpayers who will be footing the bill, plus any bondholders who miscalculated how long the scam would keep going.

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  • general congreve says:

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