Thursday, November 17, 2011

chatter on the zone's price level vice

Julio said in reply to Eric...
Italy had debt over 100% of GDP for most of the decade, and its bond rates were lower and, more importantly, did not diverge from Germany until 2008.
http://www.reinhartandrogoff.com/data/browse-by-topic/topics/9/
http://www.economicsinpictures.com/2011/08/bond-yields-piigs-compared-to-germany.html
Unless 100% is a magic number above which confidence evaporates, I don't see how your premise conforms to the data.
op said in reply to Julio...
thanx julio
eric shows how a smidge of facts only emboldens
certain ambitous communicators
among the unself aware benighted
italy pre euro also ran mid single digit inflation rates at will
so todays 100% is indeed more of a burden long term

why??
well that requires a set of numbers to establish
------------------------
60% 100% ... 200% thats a stock number
not a flow rate
and
since we look forward on debt burden dynamics
in ten twenty year hunks
the size of the debt at a point in time
is not enough info
you need to know
the expected trend nominal gdp expansion rate
the average expected rate of interest on debt
the expected primary deficit or surplus
to maintain acceptable levels of domestic employment
all of these have policy levers at some level
that can move them around
as all too often we repeat about the zone members
the institutional problem they fac
is the theatrically "independent" ECB
cavorting about like scrooge
above the reach of member nations
-- by design --
op said...
" I am beginning to believe that we will need a "Lehman" event to force their hand - at which point, of course, it would already be game over for the European financial situation."
hell far from taling its lehman leap into the abyss

the ECB hasn't even faced it's bear stearns moment

recall the reality
nation states are not firms
they seldom if ever fail because of a hi fi crisis
the key is not to confound a nation state
with its gubmint pro temp
the real truth
the ECB is bluffing here
call the bluff giips
pappa-dope-lis shoulda gone thru with the referendum
as pols showed the credit lords
were about to get the big NO..
the ECB would race in with a "modest rescue "
the log jam would quickly break everywhere in gipps-landia
the ECB implying
"full backing for all "
Peter K. said in reply to op...
"the real truth
the ECB is bluffing here"
You may be right. I'm not convinced though.
My guess is that Greece will default. They should default. Are you saying they will be bailout? I don't think so.
When Greece defaults will this set off a panic? Is that when the ECB rides to the rescue? Maybe.
Maybe as the ECB strings things along and the situation continues to deteriorate with slowing growth and mounting debts and fading confidence, that some small banks goes under and sets off a panic.
"the ECB hasn't even faced it's bear stearns moment"
Italy can't budget cut it's way out of 7 percent interest rates and the resulting compounding debt. Either it will be bailed out or default.
The market knew the Fed *could* bailout investment gambling casinos as they did with Bear Stearns, but the Fed let Lehman go and the markets still freaked, credit froze, and in the fourth quarter 2008 the economy was contracting at a rate of 9 percent until helicopter Ben arrived.
op said in reply to Peter K....
"Are you saying they will be bailout?"
no back stopped
difference ?
either way the ECB buys up existing issues
but if the ECB steps up to assure no default on existing greek bonds
ie back stopping
the size of the ECB buy in is reduced because markets will calm
------------
"Italy can't budget cut it's way out of 7 percent"
it won't ever have to
the interest rates on new issues
will drop like a stone once default
is out of the question
and today only a smal piece of existin sovereign italian debt is of recent enough issue to have been bought at a high coupon rate
the rest of the market will see a huge capital gain
its the present sellers that may curse the day so to speak
of course specs are in and out in and out
on both sides
but
look at the big loss made by smarty pants
betting here against the liquidity trap
op said...
" They seem to be completely ignorant that the debt-deflation dynamic in place only erodes confidence
further"

of course they understand this
and they know it will reverse itself
on back stiop declaration day
think default scare bubble
these rates are only goping to cost some folks on the short side to blow apart
once sgiip sovereigns soar
in effet the ECB can wait till they get
all the fiscal iron maidens they require
op said in reply to op...
recall the ecb can tacitly support a slow fall in price
step by step like the gears of a torture rack
any collapse will be stopped has been stopped
by the ECB buying in
b4 the market runs loco
these bond rate rises--price falls --
have benn managed all along
with undeclared de facto interim ceilings
at each step on the up side climb
its like managing a float something these f ers know how to do at the spinal level
op said in reply to op...
its like a trapeze act with a hidden safety net
op said...
look if thre franco german bankers wanted to kck any onne of the gipps/sgiips out
they could have
they don't want to
op said...
"When the ability to sterilize evaporates"
after what the chinese have demonstrated about the limits of sterilization
that line is about like
"when hell freezes "
but forget that
enter ...the liquidity trap eh ??
oh the markets don't believe in liquidity traps ??

the fed by its gobbling ups
i think proved otherwise
these last four years
it is quite a lark to talk about the differences between treasury purchases and fed purchases
but the very same utterly fraudulent artificial distinction
this flase spigot for public credit
the treasury faces but not the fed
has an exact parallel here
the ecb
and this tom fool ESFS
side bar on a side bar
"What am I missing hear?"
by using the treasury route the phoney spigot gets utilized
once again like with the silly limits to sterilization game
its all smoke and mirrors
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