Are people still worried?

femur61

Now the situation in Greece seems to have abated. Is it only a pyricc victory for the EU/ECB or do you think we still have a problem. Seems to what I've been reading about Greece that they are a lot worse than us not just the cuts that will be imposed but they have to support 40% of a PS workforce with unbelievable workpractices i.e. retirement age, pensions etc.

One of the reasons I would like to peoples thoughts is do I still need to move money. I have opened a sterling account in NI and it will be finalised next week and maybe I don't need to move my "plan b" out of the banks.

Sand

Im not sure it could be described as a victory for the EU/ECB. Greece hasnt actually given up anything: austerity is required, default or no default. So passing of the austerity budgets are in the Greeks own interest, regardless of other concerns.

Meanwhile, the EU/ECB are committed to a new Greek bailout offering more funds at better interest rates, so they are wading further and further out into the minefield. Were Id the EU/ECB Id become more and more concerned as Greece came closer and closer to achieving a balanced budget as that would be a necessary precondition for making default a real option. The EU/ECB have shown that theyre terrified of a default and will offer almost any extension of terms to avoid dealing with reality.

This is bad, as we've essentially been playing for time since 2008, hoping the EU/ECB will evolve to a realistic solution that will address the real problems. To give them that time, we have essentially suspended our own decision making process and our own interests. However, here we are three years later and not much further advanced - strong public opposition, weak political leadership, and an ECB which freaks out whenever someone proposes a realistic solution. In fact things are a lot worse - the amount of debt has increased, and the EU/ECB are taking on more and more and more of it, which leads to greater public opposition. We may have to accept that the EU/ECB is not capable of providing a solution that is in our interests.

That leaves us with one rather scary alternative - that we will have to pursue our own interests, rather than presuming Trichet/Sarkzozy/Merkel will pursue our interests for us.

Dob74

The EU need to decide weather to allow Greece(and us) to right off some of there loans.
Personally I dont see why we should have payback private bank debt.
Similiar there is massive tax evasion in Greece and everyone is turning a blind eye.

No one is stepping up to the plate its just kick the can down the street.
Lehmann's 2 next september with Greece defaulting?

Permabear

This post has been deleted.

Scofflaw

Part of what seems to be happening during the apparently interminable political game being played out over the crisis, apart from the Germans making up their minds on whether/how to carry the can, is that the various banks with large exposure to Greece (and other countries in difficulties) are attempting to rearrange, hedge, and reduce their exposure. If they're successful on the same timescale as the Greeks reaching a balanced budget (on a non-fiction basis), then when the Greeks reach a position in which default becomes a possibility, the European banking sector may have reached a position where debt reduction also becomes a possibility.

'Kicking the can down the road' has become such a worn-in expression that it sometimes obscures the fact that many of the players are fairly busy rearranging themselves on the field.

cordially,
Scofflaw

Sand

The EU need to decide weather to allow Greece(and us) to right off some of there loans.

Given that the Greeks owe most of their loans to the EU/ECB thats becoming an increasingly self defeating decision. At the start of the crisis, a default on the private banks could have been possible. The shareholders could have been wiped, the bondholders forced into debt for equity swaps and the government stepping in to make small despositors good and to secure the payments system. Crisis dealt with. The public could have been sold on the idea of evil capitalist bastards getting burnt, with small pensioner despositors being rescued.

Now, at this point, its the ECB and the EU institutions/sovereigns who are increasingly on the hook. Private shareholders and bondholders are fleeing, being cashed out at the taxpayers expense. Now, a write off of debt is all the more politically difficult to achieve because the guys who *should* have taken the hit are laughing all the way to the bank, meanwhile the taxpayers are furious at the very concept of having to be the mugs who are left with the cheque. Plus Trichet and company would actually have to admit that hoovering up all the Greek debt was actually a pretty bad policy. The fallout of the ECB's foolish policy coming home to roost could see the ECB collapsing if taxpayers revolted against bailing out the ECB on its portfolio "investments".

Why should we expect our EU partners to be able to face down that very real, and very understandable, fury when our own government retreats in full flight when pensioners protest against very modest reforms like medical cards being means tested? Its an increasingly desperate hope that if we just hold on for a few more weeks, months or years that suddenly, when everything is at its grimest that the Germans and French will come thundering over the horison, the sun rising behind them, to save us by offering generous debt forgiveness and limitless access to credit at easy terms.

Quite simply, if I were the ECB/EU - if youre Ireland, and if youre paying your debts on schedule...why do I care what measures you have to take to ensure you pay me on schedule? So long as we dont threaten to default, the ECB/EU couldnt care less about our domestic economic position. Why would I risk increasing moral hazard by forgiving your debts? Why would I pass your debts (freely chosen - it was the freely elected Irish government that decided to take on the entire debt of the Irish banks) onto the backs of the wider European people?

This is why the "badly behaving" Greeks seem to get better deals whilst teachers pet, Ireland, cant even negotiate a tiny reduction on an interest rate which seems to mystify so many people. Nice guys finish last. Unless we're willing to give the ECB/EU a reason to talk to us, they wont.

Our absolute priority, and the Greeks, needs to be taking charge of our own destiny by ensuring that as a state we live within our means. The sooner we reach that position, the sooner we can dictate terms to the ECB/EU as to when, how or even if they will be repaid.

ei.sdraob

Permabear wrote: »

This post had been deleted.

They are infallible since gravity failure is not allowed in this weird system we find ourselves in

Scofflaw

ei.sdraob wrote: »

This post had been deleted.

They are infallible since gravity failure is not allowed in this weird system we find ourselves in [/QUOTE]

If it seems to defy economic logic, that's because it does defy economic logic. That, in turn, is something politics regularly does - and as long as the politicians have sufficient will, sufficient support, and sufficient resources, it can be done successfully. The question is whether they do - so far the answer in this case is yes, but it's an egg and spoon marathon rather than the 100-yard hurdles, so we won't know whether it's successful or not until it's over, and we won't know whether it's over until it's either been successful or not. And, sadly, neither the EU nor the ECB come within shouting distance of infallibility. I'm not sure who the people are supposed to be who claim that - I suspect they're the sort of people who are happier out in the fields, scaring crows.

cordially,
Scofflaw

Debtocracy

The european debt crisis will require 2-3 Trillion to be effectively dealt with. Repeat baliouts will be needed as economic growth will be so low and hidden losses will emerge from European banks as the derivative's market implodes.

irishh_bob

Dob74 wrote: »

The EU need to decide weather to allow Greece(and us) to right off some of there loans.
Personally I dont see why we should have payback private bank debt.
Similiar there is massive tax evasion in Greece and everyone is turning a blind eye.

No one is stepping up to the plate its just kick the can down the street.
Lehmann's 2 next september with Greece defaulting?

september 2011 ?

ressem

Articles in a paper today (haven't found a link yet) were suggesting that it's less the debt writedown that is worrying the central banks in Europe and the States;
and more to do with a failure to pay on time and in full triggering credit default swap payouts.

Having to pay out would bring a whole new gang of insurance institutions to the brink. So we're seeing articles such as "Does the euro crisis have a hidden A.I.G.?" http://www.nytimes.com/2011/06/23/business/global/23swaps.html?pagewanted=1

If you look at the games that a US hedge fund are alleged to be participating in, (http://www.propublica.org/article/the-magnetar-trade-how-one-hedge-fund-helped-keep-the-housing-bubble-going)
losses from side betting could exceed the writeoff.

Scofflaw

ressem wrote: »

Articles in a paper today (haven't found a link yet) were suggesting that it's less the debt writedown that is worrying the central banks in Europe and the States;
and more to do with a failure to pay on time and in full triggering credit default swap payouts.

Having to pay out would bring a whole new gang of insurance institutions to the brink. So we're seeing articles such as "Does the euro crisis have a hidden A.I.G.?" http://www.nytimes.com/2011/06/23/business/global/23swaps.html?pagewanted=1

If you look at the games that a US hedge fund are alleged to be participating in, (http://www.propublica.org/article/the-magnetar-trade-how-one-hedge-fund-helped-keep-the-housing-bubble-going)
losses from side betting could exceed the writeoff.

From the NYT article:

The equity bought by Magnetar represented just a tiny fraction of the overall CDO. If it costs, say, $50 million, an entire CDO could be 20 times that, $1 billion. And if the CDO begins to go south and you're smart enough to have taken out enough insurance, you can make hundreds of millions of dollars. That, of course, would take a bit of the sting out of losing your original $50 million investment in the equity.

Magnetar Does Its First Deal

As Magnetar set up its CDO shop, the hedge fund hired Jim Prusko, a smart and affable investor who had worked previously at the Boston money-manager Putnam Investments. He would shoulder much of the work of courting Wall Street bankers and managers who worked with the hedge fund. He operated out of Magnetar's office in midtown Manhattan around the corner from Saks Fifth Avenue. In an office of 20-somethings, Prusko, then 40 years old, stood out as the "old man."

Urg. Offices full of 20-somethings (mostly men), allowed to play with billions of dollars in an attempt to pull off bigger, cleverer deals than the next office full of 20-somethings. That's just wrong - stupid wrong, to a degree difficult to parallel in any other arena, short of handing out nukes to them and seeing what they can pull off if they're 'smart' enough.

What would happen if we ran the electricity grid like that? Or the roads? Or any other vital part of modern socio-economic infrastructure?

glumly,
Scofflaw

beeftotheheels

Scofflaw wrote: »

Urg. Offices full of 20-somethings (mostly men), allowed to play with billions of dollars in an attempt to pull off bigger, cleverer deals than the next office full of 20-somethings. That's just wrong - stupid wrong, to a degree difficult to parallel in any other arena, short of handing out nukes to them and seeing what they can pull off if they're 'smart' enough.

What would happen if we ran the electricity grid like that? Or the roads? Or any other vital part of modern socio-economic infrastructure?

glumly,
Scofflaw

Haven't you ever heard of the efficient market hypothesis??

Amused,

Beef

Scofflaw

beeftotheheels wrote: »

Haven't you ever heard of the efficient market hypothesis??

Amused,

Beef

I find myself less and less able to distinguish it from other religious dogma...

cordially,
Scofflaw

beeftotheheels

Scofflaw wrote: »

I find myself less and less able to distinguish it from other religious dogma...

cordially,
Scofflaw

I have to say, I never tried!

No, that's a lie, 12 years ago when I first donned a suit and headed into the city I bought into it.

Two years later my best mate left the firm we had both joined on graduation and went to work for a US Gas trading business.

I remember sitting in a pub in Whitechapel a couple of months later having a pint and listening to her rant about the fact that their auditors were asking all the wrong questions "You'd think they actively sought out people who didn't understand M2M accounting to audit our books so they couldn't ask us the wrong questions", I remember saying "calm down C, remember how it was when you worked for us, remember how we thought everything was perfect and there was always a right answer and then we started work and discovered that things got made up as we went along".

She remembered, she calmed down, we enjoyed our few pints.

Couple of months later it turned out Arthur Andersen may have been turning a blind eye to inconvenient issues in their biggest consulting client's audit, and C was out of a job when Enron went t!ts up.

And my infantile faith in the efficient market hypothesis went right along with it.

Scofflaw

beeftotheheels wrote: »

I have to say, I never tried!

No, that's a lie, 12 years ago when I first donned a suit and headed into the city I bought into it.

Two years later my best mate left the firm we had both joined on graduation and went to work for a US Gas trading business.

I remember sitting in a pub in Whitechapel a couple of months later having a pint and listening to her rant about the fact that their auditors were asking all the wrong questions "You'd think they actively sought out people who didn't understand M2M accounting to audit our books so they couldn't ask us the wrong questions", I remember saying "calm down C, remember how it was when you worked for us, remember how we thought everything was perfect and there was always a right answer and then we started work and discovered that things got made up as we went along".

She remembered, she calmed down, we enjoyed our few pints.

Couple of months later it turned out Arthur Andersen may have been turning a blind eye to inconvenient issues in their biggest consulting client's audit, and C was out of a job when Enron went t!ts up.

And my infantile faith in the efficient market hypothesis went right along with it.

I recall a similar revelation when I went into business - prior to doing so, I had assumed that businesses were mostly run in a rational and intelligent way, rather than being cages full of gibbering monkeys flinging poo at each other. Ah, youth and naivety!

Still, the marvellous thing about a market economy is that by and large it manages to work despite that, which virtually no other system seems to. I wonder if it's not the case that the problem in the other systems is allowing over-large shares of control to a small number of operators - a problem that also applies in the financial industry - because it seems that you need over a certain number of independent operators (or transactions, in cases where that's the measure) for the monkeys to cancel each other out and produce something which, while hardly Shakespeare, is at least vaguely sensible.

Also, I have to give Andersen kudos for providing one of the best possible rejoinders to maternal concerns over self-employment, since my brother also worked for them, and had been held up as an exemplar of job security...

cordially,
Scofflaw

beeftotheheels

Scofflaw wrote: »

Still, the marvellous thing about a market economy is that by and large it manages to work despite that, which virtually no other system seems to. I wonder if it's not the case that the problem in the other systems is allowing over-large shares of control to a small number of operators - a problem that also applies in the financial industry - because it seems that you need over a certain number of independent operators (or transactions, in cases where that's the measure) for the monkeys to cancel each other out and produce something which, while hardly Shakespeare, is at least vaguely sensible.

The problem here is Black Swans. The markets seem to manage to work fine without them, seem to have issues with dealing with them, and given the sheer size of the recent ones governments have stepped in to try and mitigate the fallout (which free marketeers then use as a stick to beat up the governments for not allowing the markets to function properly, and not allowing things to get as bad as they should have done).

I guess the question right now, is what size bird is hanging out in the Greek CDS market??? But all hail the markets, damn you ECB for trying to interfere with them.

Scofflaw

beeftotheheels wrote: »

The problem here is Black Swans. The markets seem to manage to work fine without them, seem to have issues with dealing with them, and given the sheer size of the recent ones governments have stepped in to try and mitigate the fallout (which free marketeers then use as a stick to beat up the governments for not allowing the markets to function properly, and not allowing things to get as bad as they should have done).

I guess the question right now, is what size bird is hanging out in the Greek CDS market??? But all hail the markets, damn you ECB for trying to interfere with them.

Taleb always made a lot of sense to me...I seem to recall seeing some unpleasant figure with respect to the use of quant's models in the market, many of which suggest that trades can essentially be made risk-free, at least partly (in my understanding of it) because the wrong statistical distribution (Gaussian) is often their basis.

Still, we're not short on people who apparently believe that the markets, left to their own devices, produce optimal outcomes in every case.

cordially,
Scofflaw

beeftotheheels

Scofflaw wrote: »

Taleb always made a lot of sense to me...I seem to recall seeing some unpleasant figure with respect to the use of quant's models in the market, many of which suggest that trades can essentially be made risk-free, at least partly (in my understanding of it) because the wrong statistical distribution (Gaussian) is often their basis.

Still, we're not short on people who apparently believe that the markets, left to their own devices, produce optimal outcomes in every case.

cordially,
Scofflaw

And so we're back to moral hazard vs contagion.

How will the market participants learn if we bail them out of their stupidity of thinking that they had mitigated all risks? It is not just the quants, the mentality of "mitigating" risk to the point where you feel comfortable ignoring it permeates the whole financial industry, the mispricing of risk is one of the biggest issues with the credit crunch (which is ongoing in my book).

How high a price are we prepared to pay to teach them this lesson on the correct pricing of, and dealing with, risk?

The man's website is appalling but have you read his ten principles for a black swan-proof world?

http://www.fooledbyrandomness.com/tenprinciples.pdf

Scofflaw

beeftotheheels wrote: »

And so we're back to moral hazard vs contagion.

How will the market participants learn if we bail them out of their stupidity of thinking that they had mitigated all risks? It is not just the quants, the mentality of "mitigating" risk to the point where you feel comfortable ignoring it permeates the whole financial industry, the mispricing of risk is one of the biggest issues with the credit crunch (which is ongoing in my book).

How high a price are we prepared to pay to teach them this lesson on the correct pricing of, and dealing with, risk?

The man's website is appalling but have you read his ten principles for a black swan-proof world?

http://www.fooledbyrandomness.com/tenprinciples.pdf

More or less when it came out...hence my call for treating banks as utilities:

2. No socialisation of losses and privatisation of gains. Whatever may need to be bailed out should be nationalised; whatever does not need a bail-out should be free, small and riskbearing. We have managed to combine the worst of capitalism and socialism. In France in the 1980s, the socialists took over the banks. In the US in the 2000s, the banks took over the government. This is surreal.

A banking sector either nationalised as a utility, or consisting only of 'free, small, and risk-bearing' banks. One or the other - up to people's preferences.

cordially,
Scofflaw

beeftotheheels

Scofflaw wrote: »

More or less when it came out...hence my call for treating banks as utilities:



A banking sector either nationalised as a utility, or consisting only of 'free, small, and risk-bearing' banks. One or the other - up to people's preferences.

cordially,
Scofflaw

It's never going to happen though, is it?

Unless of course, the fallout of the Greek crisis ensures the nationalization of all the banks.

Maybe we should jump on the "free market" band wagon here...

Back off ECB!

Sand

Looks like the rating agencies have sunk the dream of achieving a defaultless default. Eventually people are going to have to catch up to the reality that investors arent morons - all the effort thats been exerted to try find a mechanism that might arguably not be considered a default might be better employed attempting to prove the earth is flat.

hinault

femur61 wrote: »

Now the situation in Greece seems to have abated. Is it only a pyricc victory for the EU/ECB or do you think we still have a problem. Seems to what I've been reading about Greece that they are a lot worse than us not just the cuts that will be imposed but they have to support 40% of a PS workforce with unbelievable workpractices i.e. retirement age, pensions etc.

One of the reasons I would like to peoples thoughts is do I still need to move money. I have opened a sterling account in NI and it will be finalised next week and maybe I don't need to move my "plan b" out of the banks.

In my opinion, the Greek situation is not as bad as ours!
This may seem to be a strange tack to take but indulge me for a second.

The level of non-compliance in relation to tax is the root of the Greek economic problem.
The level of non-compliance reportedly costs the Greek economy €33 billion annually. €33 billion is an estimated figure. It is surmised that the figure could well be as high as €50 billion annually.

The Greek tax take figure far exceeds an Irish economy which is more tax compliant, more liberal and far too willing to be flexible in my opinion.
We're bending over backwards to make this economy "flexible" and "liberal" while taxing our citizens to a far greater degree that the Greek citizens.

Granted if Greece and the Greeks were more tax compliant economic activity there would probably reduce.

ei.sdraob

beeftotheheels wrote: »

The problem here is Black Swans.

I made point of this before, what are the chances of nothing happening on the world stage in next 4 years and the economy grows at the nice linear rate the DoF etc predict, considering the economy is so open any shock on the world stage could knock us straight back down onto the knees.

Sand

Re the efficient market hypothesis debate and the macho 20 year old billion dollar traders...

Given the wise, serene and perfectly informed government agencies have jumped in without a clue or a plan to underwrite all losses, pay out all wages and bonuses, and to make every investor good how can it be said that those macho 20 year old billion dollar traders werent making decisions in their own best interest? It seems to have worked out very well for them: They were certain they couldnt fail, and they were right.

Even if you presume they lacked the information or rational analytical ability to serve their own long term best interests, there doesnt seem to be much of an argument for expecting the fools they passed their losses onto as being better informed or more rational.

We should have left the banks to burn in 2008. We didnt. No point crying about efficient markets now.

rumour

femur61 wrote: »

Now the situation in Greece seems to have abated. Is it only a pyricc victory for the EU/ECB or do you think we still have a problem. Seems to what I've been reading about Greece that they are a lot worse than us not just the cuts that will be imposed but they have to support 40% of a PS workforce with unbelievable workpractices i.e. retirement age, pensions etc.

One of the reasons I would like to peoples thoughts is do I still need to move money. I have opened a sterling account in NI and it will be finalised next week and maybe I don't need to move my "plan b" out of the banks.

If you want to know what others are doing check out the status of deposits in Irish banks. Money is literally pouring out of the country mostly to sterling I think.
That would suggest to me no matter what rhetoric you get here that people are still very worried.

Scofflaw

rumour wrote: »

If you want to know what others are doing check out the status of deposits in Irish banks. Money is literally pouring out of the country mostly to sterling I think.
That would suggest to me no matter what rhetoric you get here that people are still very worried.

Mm, no, not really - private sector deposits have been pretty stable the last several months, in fact:

Year|Month|Deposits|Monthly Change
2007|Jan|115,811 |
2010|Jan|131,741 |-0.47%
2010|Feb|131,477 |-0.20%
2010|Mar|129,548 |-1.47%
2010|Apr|129,158 |-0.30%
2010|May|129,090 |-0.05%
2010|Jun|128,518 |-0.44%
2010|Jul|127,966 |-0.43%
2010|Aug|127,194 |-0.60%
2010|Sep|124,689 |-1.97%
2010|Oct|124,950 |0.21%
2010|Nov|117,015 |-6.35%
2010|Dec|113,670 |-2.86%
2011|Jan|111,863 |-1.59%
2011|Feb|108,618 |-2.90%
2011|Mar|106,309 |-2.13%
2011|Apr|108,235 |1.81%
2011|May|107,482 |-0.70%


And not that far down on peak, either.

cordially,
Scofflaw

beeftotheheels

Sand wrote: »

Looks like the rating agencies have sunk the dream of achieving a defaultless default. Eventually people are going to have to catch up to the reality that investors arent morons - all the effort thats been exerted to try find a mechanism that might arguably not be considered a default might be better employed attempting to prove the earth is flat.

Ah, but the CDS problem is called by ISDA and not the ratings agencies, and who have the votes on ISDA? The banks. So, it is already being surmised that the banks, given they came up with the voluntary rollover, might vote that it didn't trigger the CDSs while obviously having a conflict of interest.

http://www.ft.com/cms/s/0/0589a94e-9d9f-11e0-9a70-00144feabdc0.html#axzz1RNE6C0LA

It has been speculated that the lawyers are already circling ISDA...

femur61

Scofflaw wrote: »

Mm, no, not really - private sector deposits have been pretty stable the last several months, in fact:

Year|Month|Deposits|Monthly Change
2007|Jan|115,811 |
2010|Jan|131,741 |-0.47%
2010|Feb|131,477 |-0.20%
2010|Mar|129,548 |-1.47%
2010|Apr|129,158 |-0.30%
2010|May|129,090 |-0.05%
2010|Jun|128,518 |-0.44%
2010|Jul|127,966 |-0.43%
2010|Aug|127,194 |-0.60%
2010|Sep|124,689 |-1.97%
2010|Oct|124,950 |0.21%
2010|Nov|117,015 |-6.35%
2010|Dec|113,670 |-2.86%
2011|Jan|111,863 |-1.59%
2011|Feb|108,618 |-2.90%
2011|Mar|106,309 |-2.13%
2011|Apr|108,235 |1.81%
2011|May|107,482 |-0.70%


And not that far down on peak, either.

cordially,
Scofflaw

I think that is because most people have moved their money. Most people I know with any money has moved thier savings. The statement from the unions now advising their members not to pay thier mortgages has worried me now as some guy on the radio said that if they carried through with that threat the banks would definetely go bankrupt. My serling account has just opened, I think I'll move some off it.

Scofflaw

femur61 wrote: »

I think that is because most people have moved their money. Most people I know with any money has moved thier savings. The statement from the unions now advising their members not to pay thier mortgages has worried me now as some guy on the radio said that if they carried through with that threat the banks would definetely go bankrupt. My serling account has just opened, I think I'll move some off it.

I'm not sure that "most people have moved their money", though. There's only a drop of 19% from peak overall - and that peak was during the period of the Guarantee, when Irish banks were probably one of the safest bets around.

cordially,
Scofflaw

Sand

In terms of confidence that were on the right path, Seamus Coffey has posted a view of the exchequer figures on the Irisheconomy.ie blog.

A year-on-year comparison which says that “the deficit fell by over €1 billion” but can only do so by forgetting about the €3.1 billion Promissory Notes payment, ignoring €1 billion of accumulating interest which we will pay and omitting €0.8 billion of interest which we did pay does not stand up to any scrutiny.....The current account deficit isn’t budging.

One of the commentators, Bryan G made a quite interesting point on the nature of growth projections in response. At any given point in time, a takeoff in growth is always projected after 2 years. As time passes, projections are revised down but the projected takeoff remains - 2 years into the future.

An interesting graph would be one where expectations of future growth for the next five years, in a given year, were all mapped together, for the last few years. It always seems that official expectations of future growth in years t+1 and t+2 are being revised down (e.g. in the 2009 SPU growth in 2011 was estimated at 5.6%) as each year passes, i.e. significant growth is always 2+ years away. If plotted the size of any such systematic “near-term over-optimistic” factor could be quantified, and I suspect this is already included in the models used by market participants.

So, we're not on a great trajectory. Mind you, the gameplan never actually seems to have been for us to solve our problems. It seems to have merely to rearrange deck chairs whilst waiting for the ECB/EU to save us. I wouldnt hold out much hope of that given the tone of this message to the Greeks from a friendly Frenchman.

@Beef

Ah, but the CDS problem is called by ISDA and not the ratings agencies, and who have the votes on ISDA? The banks. So, it is already being surmised that the banks, given they came up with the voluntary rollover, might vote that it didn't trigger the CDSs while obviously having a conflict of interest.

http://www.ft.com/cms/s/0/0589a94e-9...#axzz1RNE6C0LA

It has been speculated that the lawyers are already circling ISDA...

Beef - Regardless of the probabilities of that working, it would turn a small net 5 billion problem into a total ****storm. What would it do to banks balance sheets packed with CDS if it suddenly became apparent that CDS were actually worthless?

As I've said before the ECB/EU hatred of CDS is completely insane.

beeftotheheels

Sand wrote: »

@Beef


Beef - Regardless of the probabilities of that working, it would turn a small net 5 billion problem into a total ****storm. What would it do to banks balance sheets packed with CDS if it suddenly became apparent that CDS were actually worthless?

As I've said before the ECB/EU hatred of CDS is completely insane.

An alternative analysis is, of course, that the CDSs are quite capable of turning a €20bn haircut into a €x00bn problem since no one has any visibility as to where the CDS counter-party risks lie, and no one is sure that the Greek CDS market has not taken on a life of its own with Greek CDSs being bought, not as insurance for Greek bonds already held, but as an investment intending to benefit from the mess that is Greece.

Sand

...no one has any visibility as to where the CDS counter-party risks lie...

The ECB doesnt have an internet connection?

Table 6: Top 1000 Reference Entities (Gross and Net Notional)
Week Ending: 2011-07-01


Reference Entity Sector Market Type Gross Notional (USD EQ) Net Notional (USD EQ) Contracts DC Region
HELLENIC REPUBLIC Government Sov 78,126,485,591 4,848,466,052 4,541 Europe

Debtocracy

The Wall Street banks are the insurers of the European banks. No wonder Geithner was so concerned about Ireland defaulting.

rumour

Scofflaw wrote: »

Mm, no, not really - private sector deposits have been pretty stable the last several months, in fact:

Year|Month|Deposits|Monthly Change
2007|Jan|115,811 |
2010|Jan|131,741 |-0.47%
2010|Feb|131,477 |-0.20%
2010|Mar|129,548 |-1.47%
2010|Apr|129,158 |-0.30%
2010|May|129,090 |-0.05%
2010|Jun|128,518 |-0.44%
2010|Jul|127,966 |-0.43%
2010|Aug|127,194 |-0.60%
2010|Sep|124,689 |-1.97%
2010|Oct|124,950 |0.21%
2010|Nov|117,015 |-6.35%
2010|Dec|113,670 |-2.86%
2011|Jan|111,863 |-1.59%
2011|Feb|108,618 |-2.90%
2011|Mar|106,309 |-2.13%
2011|Apr|108,235 |1.81%
2011|May|107,482 |-0.70%


And not that far down on peak, either.

cordially,
Scofflaw

Thats a curious take on the situation.

These figures are a pretty significant change by any standard. The deposit base in the country is down nearly 20% in less than 18 months.

What would you consider a problem??

Scofflaw

rumour wrote: »

Thats a curious take on the situation.

These figures are a pretty significant change by any standard. The deposit base in the country is down nearly 20% in less than 18 months.

What would you consider a problem??

An ongoing fall, and one from a position that wasn't artificially inflated by a government guarantee?

What do the last 4 months look like to you?

curious,
Scofflaw

rumour

Money leaving the country with an abnormal influx in one month worth investigating.

Scofflaw

rumour wrote: »

Money leaving the country with an abnormal influx in one month worth investigating.

Fair enough - you could read it as either. We'll see what we see when we see it, I guess.

cordially,
Scofflaw

beeftotheheels

Sand wrote: »

The ECB doesnt have an internet connection?

Table 6: Top 1000 Reference Entities (Gross and Net Notional)
Week Ending: 2011-07-01


Reference Entity Sector Market Type Gross Notional (USD EQ) Net Notional (USD EQ) Contracts DC Region
HELLENIC REPUBLIC Government Sov 78,126,485,591 4,848,466,052 4,541 Europe

What was that link designed to prove? No one has a complete picture of every CDS written on Greek debt or where they are, and linking to a clearing system when not all CDSs are in fact traded through that clearing system proves nothing.

You do see that that link is about as useful as a link to the BoNY Mellon depository university would be in determining the market cap of Barclays? The crucial difference being that we have data on the market cap of Barclays, not least from the FTSE, but the amount of shares in ADRs with BoNY Mellon does not necessarily shed any meaningful light on that data.

Sand

@Beef

What was that link designed to prove? No one has a complete picture of every CDS written on Greek debt or where they are, and linking to a clearing system when not all CDSs are in fact traded through that clearing system proves nothing.

Its designed to prove that your claim that no one has any visibility of the Greek CDS market is nonsense. Every single CDS trade is reported to the DTCC and the DTCC is by far the best source of information on CDS contracts.

From the DTCC website

Trade Reporting Repository

The Warehouse comprises a Trade Reporting Repository that operates and maintains the centralized global electronic database for virtually all CDS contracts outstanding in the marketplace. The repository maintains the most current credit default swap (CDS) contract details on the official legal, or gold record, for both cleared and bilateral CDS transactions.

...................................

In establishing the Warehouse Trust Company as a regulated entity, our aim is to ensure that regulators, wherever they are located, have unfettered access to the information they need to assess risk exposure in the global market, and that industry participants have the assurance of that regulatory oversight over the critical infrastructure that supports the market activities.

Its almost as if they recognised the need for transparent information on the CDS market...and provided it.

Youre trying to portray CDS as some sort of arcane contracts which are ticking away ominously with no one knowing exactly what they are, or where they are. What youre missing is that theyre very plain vanilla, publically reported and very often the writers of CDS are also buyers of CDS. Thats why the net exposure....the maximum amount that will have to be transferred in the event of them being triggered....is less than 5 billion dollars. Thats it. Less than 5 billion dollars moving from the losers to the winners.

Thats how small the CDS market is and why the ECB/EU screaming and shouting about the CDS market is so derranged. The only reasonable explanation is that the political line is that there will be no sovereign default, and the ECB/EU hate the very concept of a hedge against the possibility of an event they claim they will not allow.

beeftotheheels

Sand wrote: »

@Beef


Its designed to prove that your claim that no one has any visibility of the Greek CDS market is nonsense. Every single CDS trade is reported to the DTCC and the DTCC is by far the best source of information on CDS contracts.

From the DTCC website



Its almost as if they recognised the need for transparent information on the CDS market...and provided it.

Youre trying to portray CDS as some sort of arcane contracts which are ticking away ominously with no one knowing exactly what they are, or where they are. What youre missing is that theyre very plain vanilla, publically reported and very often the writers of CDS are also buyers of CDS. Thats why the net exposure....the maximum amount that will have to be transferred in the event of them being triggered....is less than 5 billion dollars. Thats it. Less than 5 billion dollars moving from the losers to the winners.

Thats how small the CDS market is and why the ECB/EU screaming and shouting about the CDS market is so derranged. The only reasonable explanation is that the political line is that there will be no sovereign default, and the ECB/EU hate the very concept of a hedge against the possibility of an event they claim they will not allow.

The best is not good enough if it is meaningless.

Back to Barclays and BoNY, Barlcays shares are traded. BoNY operate a despoitary for Barclays ADRs to facilitate all trades of Barclays ADRs on the NYSE therefore all Barclays shares are deposited with BoNY.

It just doesn't follow.

There is a secondary market in CDSs, therefore all CDSs are traded on that secondary market? Not even all trades will take place through a depository unless they are on market/ OTC trades. The big ones will be private transactions between consenting adults, and we have no visibility to these apart from what the central banks can extract from the banks.

ei.sdraob

If "consenting adults" are wishing to play casino games privately then thats their choice.

To point at these "adults" and claim their gambling will bring down the economy is scaremongering, especially if you yourself admit you dont know the size of the casino.

kippy

Are people still worried?
On the ground, yes of course they are, no matter what situation.
The unemployed and elderly are worried about what they will do when the portion of the 16 odd billion of cuts that effect them, hit them over the next 4 odd years.
The public service are worried about the portion of the cuts that will hit them,
Those still at work are worried about how all the cuts above will hit them.
Everyone is worried about the increasing taxes, levies that are part of the 16 billion package.

Thats just the portion of the fiscil deficit we have to "worry" about.
Then theres the still, in my opinion, the banks. While we have the money available to us in the case of a "worst case scenario" I doubt the issue of residential mortage defaults has been factored in. I have no doubt we will have to put more than we have bargained for into NAMA and the remaining banks.

We've already begun to see some of the anger on the streets in relation to the hospital cuts - that's just the start of it.

So yeah, people are worried but trying to get on with life.

Sand

@beef

The best is not good enough if it is meaningless.

What part of "Every single CDS trade is reported to the DTCC" proved difficult?

beeftotheheels

Sand wrote: »

@beef


What part of "Every single CDS trade is reported to the DTCC" proved difficult?

Trade

And by the way, only on-market, or if you're feeling pedantic the "on grey-market" trades are reported to them, not private transactions since they have no regulatory function and there is no benefit to private market participants sharing information on price unless forced to.

Again, the number of shares in Barclays BoNY holds in no way reflects the market cap of Barclays. The clue is in the name. Secondary market.

So you cannot base an analysis on the size of the CDS market based on the information available on the secondary market. All we can say for certain is that the secondary market is the minimum, but it gives us no meaningful insight into the maximum since a depository has neither the means not the right to collect data on that.

beeftotheheels

ei.sdraob wrote: »

If "consenting adults" are wishing to play casino games privately then thats their choice.

To point at these "adults" and claim their gambling will bring down the economy is scaremongering, especially if you yourself admit you dont know the size of the casino.

Sand alleged based on flawed data that the CDS market is benign. I took issue with this. We have no meaningful data on the size of the CDS market.

I never claimed that their gambling will bring down the global economy, I pointed out that we simply don't have the data, and the markets don't have the data, which could itself create a self fulfilling prophecy.

later12

Sand wrote: »

@beef
What part of "Every single CDS trade is reported to the DTCC" proved difficult?

I think they say it's about 95%, but of course the netted figures - which you are using - are only a small proportion of the total reported.

Every transaction is not included in the net notional amount - and neither should it be. However, you're ignoring trading in the street, as if it just doesn't occur. While gross notional amounts are obviously exaggerated figures for CDS, if street trades are concentrated to specific dealers, then the gross notional amount does actually gain relevance. So beeftotheheels has a valid point there.

My own biggest problem with your apparent dismissal of the CDS problem is the fact that should a restructuring occur, a restructuring of Irish and Portuguese, and perhaps Spanish debt could follow. So you cannot look at a Greek CDS call as an isolated event, you have to look at the CDS exposure to all PIGS.

Using the netted figures, Ireland is there at about €4bn, Portugal €6bn, and Spain €18bn. I won't even mention the gross notional figure because my mental calculator doesn't go into triple digits past midnight. Presumably most of these CDSs are for physical settlements and we should be confident that sellers of protection would be able to catch their losses fairly comfortably, but we really don't know anything helpful where these CDSs are concentrated or what they are doing, or how counterparties are hedging themselves with off exchange derivatives. So I would be very slow to share your dismissal of the dangers of a CDS problem arising out of a Greek credit event.

ei.sdraob

Ok me and Sand enter into a derivatives contract gamble for trillion euro, one wins one looses, do we take down the world economy with us, does a tree make a sound when it falls in a forest...

Anyways the problems with Ireland, Greece etc are not liquidity nor derivatives but plain old bankruptcy and insolvency too (if it wasnt for ECB doing its job).
Hell our banks did not engage in derivatives (not that we are aware of anyways) on the scale the US banks did, the issues here are down to classic bad banking.

Crazy Horse 6

If people would just go out and spend in the shops everything would be alright.:rolleyes:

ei.sdraob

I dont agree, pouring more water into a bucket full of holes doesn't lead to a full bucket.

kippy

ei.sdraob wrote: »

Ok me and Sand enter into a derivatives contract gamble for trillion euro, one wins one looses, do we take down the world economy with us, does a tree make a sound when it falls in a forest...

Anyways the problems with Ireland, Greece etc are not liquidity nor derivatives but plain old bankruptcy and insolvency too (if it wasnt for ECB doing its job).
Hell our banks did not engage in derivatives (not that we are aware of anyways) on the scale the US banks did, the issues here are down to classic bad banking.

One has to wonder, what is the basis (right at the back end) for the "bad banking".
Somewhere along the line, one would think that the products mentions above have had some part to play in the collapses we have seen here and across europe.