I actually don't disagree with your last post all that much. Besides the fact that I think that honesty in the long run usually pays, but it carries the risk of severe punishment in the short term.
I actually don't disagree with your last post all that much. Besides the fact that I think that honesty in the long run usually pays, but it carries the risk of severe punishment in the short term.
Congratulations America
The question is if you can get through the short-term or not. It is very early days yet, but after the first few days the markets are saying yes: honesty pays.
If Greece had been honest about its state of its economy 5 years ago and tried to fix it then, I don't doubt the problem would be nowhere near as bad as it is now. Ditto if the UK had continued under Brown-style leadership for another 5 we'd be a hell of a lot deeper in the hole.
By the way thanks for saying you "don't disagree with (my) last post all that much."
Its refreshing to see someone write something like that here after/during a big discussion. Especially when we've been on this sort-of topic for about 9 years now
For Wiggin; you were right I shouldn't have logged in the UK with California and Greece. Where California and Greece are considered high-default risks, the UK still hasn't sunk quite so low. Yet at least.
Congratulations America
Greek loans are rated as junk
UK loans are rated AAA
What was the rating of Greek loans a few months ago?
Haha, maybe not the best time to quote ratings, isn't it?
So where did Victoria Beckham get into this topic?Obviously this is all WAGs since so many factors will contribute to a recovery.
Sorry, couldn't resist
"Wer Visionen hat, sollte zum Arzt gehen." - Helmut Schmidt
A- in October which is nothing remotely like AAA.Originally Posted by Loki
What was the rating of Greek loans a few months ago?
Well Randblade, a couple of days ago I read a neat little piece about a product designed in 2009 (that's after the shit hit the fan) to deal with the fall out of bad loans that got an AAA rating as little as six months ago. A week ago it was downgraded to junkstatus. I don't really recall if Lehman's ever got to the point that its ratings were downgraded at all. I think we can savely say that the rating agencies were a bit off on that too.
I don't quite know what these rating people do, but appearantly they're not even good with short term projections. Using them as a guideline for long term plans seems like utter folly to me. I don't think the world would be much worse off if they were closed down tomorrow. Their illusion of certainty has popped, now that we know the magic doesn't work, we might as well forget about it alltogether.
Congratulations America
Indeed rating agencies are not the be-all and end-all, but the point is there is a massive difference between the UK and Greece with them.
The difference is; Greece has more or less normal loans of short duration, the UK has loans with an unexceptionally long duration. This is what keeps the UK out of the wind, it can't be pushed around quite as much because - so far - it doesn't need huge amounts of money right here and right now. Greece needed it yesterday.
Rating agencies are a waste of time, it should be made illegal to base official policies on their ratings. They should continue as a service to private investors who don't have the means to evalutate creditworthiness of opposite parties.
Congratulations America
What would you base official policies on instead?
The CDS market is a more efficient alternative, this again has a major difference between the two nations.
http://247wallst.com/2010/05/19/merk...hort-the-euro/
(Agreed on the ratings agencies, Hazir.)“A failure of the euro means a failure of Europe,” German Chancellor Angela Merkel said today, according to Dow Jones. This is after she banned naked shorting in some financial stocks and supported curbs on speculation in the euro and certain sovereign debt issued by Eurozone members.
Merkel has yet to get approval for her nation’s contributions to the nearly $1 trillion bailout fund for weaker European countries from the lower house of the German parliament. Her comments may be designed to move the approval along. But, her enthusiasm for helping Greece has been consistently questioned. German public opinion is against the move. Some German leaders have even asked large banks in the country to contribute to the bailout. That might be to protect the bank’s own interests, or to show multilateral support from several corners of the financial industry in Europe’s largest nation.Observers continue question Merkel’s motives. It could be argued that the collapse of the Eurozone partnership would strengthen Germany’s financial system because it could go back to its own currency, but the country would then have to deal with significant fallout, some of which is not obvious.
A collapse of the euro would mean a weakening of several economies, all of which import German goods. But, the bailout carries that risk as well. The austerity measures being adopted by Greece, Spain, and Portugal along with new taxes being implemented in the nations could be regressive. The actions may eventually hamper GDP growth, in which case Germany’s exports would suffer as well.
Some financial experts believe that Merkel is acting in the interest of German banks which hold billions of dollars in sovereign paper in Eurozone paper. Defaults could swamp the balance sheets of those banks.
But, the real reasons behind Merkel actions may be more complex and sinister. There is a great deal of evidence that some of Germany’s large banks have bet against both the euro and sovereign debt in the weakest nations in the region. If so, these banks, like other speculators, probably made billions of dollars on such deals.
Merkel may have to deal with the accusation, probably an accurate one, that Germany allowed its banks to take sides against the euro as the government helped drive its value down. How would it look if Germany then left the Eurozone and its banks became, under a set of circumstances helped by Merkel, rich in the process?
The latest latest news is that people are now betting on the authorities going to act to support the (external) value of the euro. Why anybody would be crazy enough to do that at a time that the euro is just about at the right level to give a boost to growth in a huge chunk of the eurozone is beyond me.
Congratulations America
This is all looking as crazy as the UK's situation leading up to Black Wednesday. Worse even
it's amusin seeing people passing the buck. This crisis is not the fault of speculators, rating agencies or the banks. The buck lies firmly with the respective governments past and present. Including Germany etc
Well, I have this feeling Germany is cooking up a very nasty surprise for 'the markets'. That surprise being that the new target isn't going to be a 3% deficit but a 0% deficit. That would create a huge fall out in demand for capital.
Congratulations America
And are Germany going to start following that rule themselves? France?
It's not as if the 3 percent 'rule' has been followed anyway.
Again, you are totally unaware of what's really happening; the Germans already have changed their constitution to the effect that their government will be forced to have a less than 0,35% deficit in the near future. Your inability to follow the news coming from other countries really impairs your ability to evalutate international events.
Congratulations America
A change they can change back or ignore. I am not remotely unaware of what's really happening, what's "really happening" is that Germany's current budget deficit is 3.3% with the forecast that it could hit 6% this year. Those are the sole facts, the rest is just words.
Immaterial claims about what they will have in the future mean less than what they're actually doing now. So Germany is running a 0.4% deficit in the future and there's a major crash - as bad or worse than the last couple of years, very possible - you're saying they simply won't go below -0.5%? I call that bullshit, you call it a fact, that's the difference between us.
Lets not forget either the German constitutional requirement in the Maastricht Treaty for "no bailouts". How's that going again? Or the 3% limit they've long insisted on which they're currently in breach of!
You're inability to go beyond "treaties", "constitutions" and other words really clouds your ability to evaluate international events that really occur.
No, the German Constitution can't be changed back as easily as the UK's constitution. Starting 2016 they can't run deficits of the level they are running now or even before the crisis. Then party time is over for the markets, because billions of safe German bonds will no longer be available.
There also is no rule forbidding bailouts, there only is a clause preventing liability. You really don't understand anything about laws.
Congratulations America
No, I understand about laws. I also understand you can't legislate away reality.
You pointedly ignored my question. So there's a major crash when an 'OK' deficit of 0.4% happens, tax receipts plummet and benefits go up and the so-called law means that the deficit won't worsen? Really?
You're a fool if you believe that IMO. This whole crisis is caused by people thinking they can pass one more law and reality goes away
EDIT: And if you think Germany can insist on this "law" across the EU and it will actually happen . . . then you're seriously misguided.
Yes, some "experts" are saying this will be worse than the crash of '87.
The speculators, traders, and rating agencies didn't cause the crisis. They just make it worse in volatility, which spooks enough retail investors that they just want out. The banks share some blame as well as governments, because of all the leverage and risk exposure they have...with enough interconnected debt that the domino effect will hit everyone, everywhere.
Put your helmets on, it's gonna get bumpy.
What's more galling; the present crisis has made it clear that they aren't gambling with their own money but with your and my money.Yes, some "experts" are saying this will be worse than the crash of '87.
The speculators, traders, and rating agencies didn't cause the crisis. They just make it worse in volatility, which spooks enough retail investors that they just want out. The banks share some blame as well as governments, because of all the leverage and risk exposure they have...with enough interconnected debt that the domino effect will hit everyone, everywhere.
Put your helmets on, it's gonna get bumpy.
Congratulations America
What happens during recessions, when revenues fall?
Hope is the denial of reality
Well the Prime Minister today had a meeting with Chancellor Merkel and afterwards said that there was "no chance" of the UK supporting any treaty passing powers from Westminster to Brussels, or the UK supporting the eurozone.
I didn't realise (though it makes sense) that if the eurozone nations wanted a new treaty co-ordinating (ie passing to Brussels) some of their powers, it requires the approval of all nations including those outside the eurozone. Britain could theoretically veto a treaty which has no impact on herself, not that it would happen.
I've asked that question twice Loki without reply. Maybe its third time lucky ...
Recessions are not considered a sufficient reason to run a higher deficit. I doubt really if recessions are going to be our biggest headache if 3/5th of Europe's states no longer borrow money.What happens during recessions, when revenues fall?
Randblade, it's not so difficult to circumvent the treaty route; the member countries of the eurozone can also change their national legislation without any treaty being necessary. Also, the Brits may want to think about using any veto in matters that don't really concern them, they will find themselves outvoted in things that matter to them that can be decided by QMV all the time if they do.
Congratulations America
I doubt we'll reach a point where 3/5ths of Europe's states don't borrow money. Nor have you answered the question as to what the states will do, if a government has a neutral budget then a crash happens in the economy then the country will automatically go into deficit! Either you'll have a position where the governments will have to dramatically slash spending (lets see what the unions etc have to say about that) potentially sending the state deeper into recession, or they will have to dramatically raise taxes . . . harming the economy and sending it deeper into recession. Either way the government loses all its popularity.
If you expect such a level of maturity and counter-Keynesian economics from Europe's states you have no evidence of anything ever to back that up. It won't happen, its never happened.
You're so funny, now you're even against programs that are extremely conservative in their economical outlook
Congratulations America
So let's say you have a recession and tax revenue falls by 20%. Do you increase taxes by enough to get rid of that shortfall?
Hope is the denial of reality
Base budgets on realized revenue instead of predicted revenue (I use predicted because projected is too optimistic a term for the way future revenue is calculated). Yes, I'm a skipping record but it's the only way to realistically reduce deficit spending.
Faith is Hope (see Loki's sig for details)
If hindsight is 20-20, why is it so often ignored?
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