The sh*tstorm commeth

Poultice

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Today, with the French Banks struggling to refinance their short term positions in a restricted liquidity dollar market, the EU finance ministers abrogate responsibility once more by putting back a decision on the second tranche of bail out funds for Greece.

You may think all of this went away back in 2008 when Gordy saved the world, no such luck I am afraid, all that did was screw the lid down a bit tighter allowing pressure to keep on building. There is no will among governments to solve the underlying problem, politicians are too short term to take effective steps, pain ain't good for votes. Perhaps there is no solution, some slightly brighter than average Yanks feel that it is not actually possible to raise enough revenue from their economy to be able to make the necessary reduction in their deficit, you all saw the state they got into trying to increase the limit on their national credit card a short while ago.

The value of money is still less than nothing, interest rates of half a percent when inflation is running at 5,6,7 or maybe an even higher percentage, ok so flat screen lcds are getting cheaper but what are things like rail tickets, electricity and food doing ?

The only way they can be keeping a 'lid' on things is by monetising the debt, that's quantitative easing or physically printing money, the US has been doing that like it is going out of fashion, this is how it works:-

The Fed wants some money, they issue treasury bills which no one wants to buy because the dollar is fooked and the rate being offered is effectively a negative one, so what they do is pretend that the money exists to buy the paper thereby allowing the Government to pay its bills, wages, guns etc. The only reason this hasn't created hyper inflation a la Germany 1930's is because demand in the economy is so weak and the dollar is still the world's reserve currency and any major run on it would screw the whole world economy, despite what the Chinese would like to think, as soon as the rest of the world works out how to do business effectively without a reserve currency then 'commeth the sh*tstorm'.

Why, I hear you ask as one, does the fate of the scabby Greeks matter in this multi trillion dollar bean feast ?

Well, this is the thin edge of the debt settlement wedge, do you remember all those toxic debts which were slipped off of the bank's balance sheets and handily parked in never never land by Gordy, Bammy, Sarky and the rest of our revered leaders, if Greece defaults then some of those CDOs and CWSs will have to be settled ie. paid up, as they are in effect insurance against bad debt, once it starts then it will unwind the entire financial system, there is effectively nearly twenty times the value of all the real wealth in the world tied up in these dodgy financial instruments, that's a bit like you earning 20k pa and having a mortgage of 400k, not disastrous if you only have to make the payments at the current ridiculously low interest rates, but a bit of a bugger if you have to pay it all back by the end of the week.

Apologies for this, just some sh*t that was rattling around in my head that I thought I would share.
 
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Mr Jinx

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What do you think will trigger such a sh*tstorm? When Greece do actually default? When OPEC start buying /selling oil in remnimbi?

I have no doubt that we're due another blow up. Just can't see what's going to trigger it. I mean there's enough bad news about already.
 
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wemisscuro

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Loving watching Tisdale prove em wrong, yet again!
Today, with the French Banks struggling to refinance their short term positions in a restricted liquidity dollar market, the EU finance ministers abrogate responsibility once more by putting back a decision on the second tranche of bail out funds for Greece.

You may think all of this went away back in 2008 when Gordy saved the world, no such luck I am afraid, all that did was screw the lid down a bit tighter allowing pressure to keep on building. There is no will among governments to solve the underlying problem, politicians are too short term to take effective steps, pain ain't good for votes. Perhaps there is no solution, some slightly brighter than average Yanks feel that it is not actually possible to raise enough revenue from their economy to be able to make the necessary reduction in their deficit, you all saw the state they got into trying to increase the limit on their national credit card a short while ago.

The value of money is still less than nothing, interest rates of half a percent when inflation is running at 5,6,7 or maybe an even higher percentage, ok so flat screen lcds are getting cheaper but what are things like rail tickets, electricity and food doing ?

The only way they can be keeping a 'lid' on things is by monetising the debt, that's quantitative easing or physically printing money, the US has been doing that like it is going out of fashion, this is how it works:-

The Fed wants some money, they issue treasury bills which no one wants to buy because the dollar is fooked and the rate being offered is effectively a negative one, so what they do is pretend that the money exists to buy the paper thereby allowing the Government to pay its bills, wages, guns etc. The only reason this hasn't created hyper inflation a la Germany 1930's is because demand in the economy is so weak and the dollar is still the world's reserve currency and any major run on it would screw the whole world economy, despite what the Chinese would like to think, as soon as the rest of the world works out how to do business effectively without a reserve currency then 'commeth the sh*tstorm'.

Why, I hear you ask as one, does the fate of the scabby Greeks matter in this multi trillion dollar bean feast ?

Well, this is the thin edge of the debt settlement wedge, do you remember all those toxic debts which were slipped off of the bank's balance sheets and handily parked in never never land by Gordy, Bammy, Sarky and the rest of our revered leaders, if Greece defaults then some of those CDOs and CWSs will have to be settled ie. paid up, as they are in effect insurance against bad debt, once it starts then it will unwind the entire financial system, there is effectively nearly twenty times the value of all the real wealth in the world tied up in these dodgy financial instruments, that's a bit like you earning 20k pa and having a mortgage of 400k, not disastrous if you only have to make the payments at the current ridiculously low interest rates, but a bit of a bugger if you have to pay it all back by the end of the week.

Apologies for this, just some sh*t that was rattling around in my head that I thought I would share.
I have changed my opinion of your posts as stated in the public sector strikes thread!

This one has turned into a blur!

Not enough hours in the day for posts like that chief! ;)
 

Poultice

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I have no doubt that we're due another blow up. Just can't see what's going to trigger it. I mean there's enough bad news about already.
The loss of confidence, a proper chaps run.

Mexico and Argentina defaulted in the past, both far bigger economies than Greece, but the Yanks were there to bail them out, this would be a default in a different age when the power of the Euro couldn't save the day.

I think confidence that governments can deal with all the issues bubbling under will slip and that will send too much money swirling around the trough looking for a home, fine back in the day when the Dollar had pretty much an unlimited capacity to take the strain, but now that is a busted flush, people are working out that you can't eat gold, the Swiss don't want any more heat in the Franc, the Chinese won't let anyone else play with the Yuan nor are they prepared to see the cost of their raw materials driven constantly upwards by speculation, inflation is becoming a major issue for them.

In short confidence is vital in a world full of instability, allowing the Greeks to bail out of the Euro might be the catalyst, gotta happen sometime.
 

Mr Jinx

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Markets battered today. Still can't see what's going to trigger the forthcoming meltdown. Will it be a gradual erosion?
 

Phil Sayers

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What is the current situation with Spain, Portugal and Ireland? I can see the World Economy managing to absorb the damage done by a Greek default (the Euro should stagger on as well I reckon - although whether Greece stay a part of it is up for grabs) but if some of those others follow suit then that really would cause problems. The loss of confidence if a large Western country like Spain ends up f*cked would be much larger than the well known and half expected Greek financial collapse.
 
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