Poultice
Very well known Exeweb poster
- Joined
- Apr 2, 2004
- Messages
- 25,228
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.
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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