The Fall of Rome

[Kadarin]

Good thing we're the hands of experienced capable strong leadership to guide us through. Oh darn, we got a community organizer instead. Doh!

The current crop of lunatic Republican candidates are SO MUCH BETTER.

 

[wuliheron]

The current crop of lunatic Republican candidates are SO MUCH BETTER.

And to think people used to be scared at the idea of Dan Quayle becoming president.

 

[mshan]

Regarding the sudden spike in Italian 10 year bond yields, this guy seems to think Italy can tolerate 7%, possibly 8% 10 year bond yield, for a quarter or two, and that real crisis in Italy will unfold in early 2012:

http://video.cnbc.com/gallery/?video=3000056310 (start at 4:10 point for those specific comments)

IIRC, Italy has a decent size amount of debt to roll over around year end / beginning of next, and then a much larger chunk of debt to roll over later in the year, so maybe that is what he is referring to (?)

 

[csteggo]

"Good thing we're the hands of experienced capable strong leadership to guide us through. Oh darn, we got a community organizer instead. Doh!"

Amazing and thoughtful addition to the dialog. Thank you. I now feel much more informed. As to us being able to withstand another global financial meltdown that is a decent question. We have difficulties passing necessary bills such as raising caps to retain our credit rating.

 

[alphatarget1]

As a layman, my very coarse and broad-brush analogy of what I think is going on:
- financial speculators see the fundamental weakness of the E. U. / Euro (currency union only, not the really needed fiscal union) and want to launch an attack on EU / Euro because it could be highly profitable to them
- the armies of the speculators and EU are lined up on battlefield, and both sides recognize that speculators have a distinct battlefield advantage right now
- so, EU members ask Germany, France, US, China, etc. for close air support so speculators army realize they will get annihilated if they attack and withdraw to fight another day
- Germany, France, U. S., etc. realize it is in their interest to help the EU defeat this speculative attack, but obviously they want something in return (e. g. China may want better trade terms with Europe and stronger role in IMF), and everyone wants to force EU members to put in place iron-clad reforms that will definitively deal with mountain of debt, over time).

Is it called "speculation" if investors simply don't want to buy a country's debt because the country has no way to pay it off?

I guess all the problems will be solved if investors gave their money away at 0% interest.

 

[mshan]

Didn't George Soros "speculate" against the Bank of England / British Pound and make a billion dollars (1992 dollars) in the process?:

http://www.investopedia.com/ask/answers/08/george-soros-bank-of-england.asp#axzz1dFQHA7ZA

http://olesiafx.com/Kathy-Lien-Day-...os-the-Man-Who-Broke-The-Bank-Of-England.html




Euro Endgame?: http://video.cnbc.com/gallery/?video=3000056089

 

[mshan]

And do you think the speculative attack on EU / Euro is ultimately any different than what happened to us in 2008 ("economic Pearl Harbor", as Warren Buffett likes to say)?:

"Four global banks are intermediaries in 85 percent of OTC derivatives transactions. The same banks dominate prime brokerage. The same banks own large equity interests in the now demutualised exchanges, clearinghouses and even warehouses of the global markets. Naturally, the same banks dominated underwriting of securitised assets. The implications have scarcely been grasped of what this portends in terms of the information asymmetries and the opportunity to manipulate markets without risk.

Each of these roles gives these few banks a view into the positions of market investors. They know who owns what, using what leverage, under what terms, and trading in which markets. Knowing that, the manipulation of prices to impoverish investors and enrich the ruling banks is child's play with a bit of ill-transparent HFT through proprietary dealing desks and connected hedge funds aligned with the firms.

These banks will protest that there are Chinese walls between their trading desks and the market infrastructure they own. The problem with Chinese walls is that they have chinks in them. (Apologies to PC crowd, but it is an old Wall Street joke I'm quoting.) We have seen from what is now reported about securitisations, that these banks structured products to trade against their clients, often colluding with hedge funds to share the profits. Is it likely that when they balance the public interest in market integrity against next year's bonus they become much more altruistic?

In October 2008 the global financial markets crashed. The story in the media is that it was a panic caused by the insolvency of Lehman Brothers. This is not the truth - or at least not all of it. The crash actually followed a $2 trillion margin call by these four global banks on their prime brokerage clients and OTC counterparties - effectively a 30 per cent increase in required margin. It was the margin call that forced liquidation of global portfolios of all asset classes - and particularly the high quality, most liquid asset classes.

Eligible margin is defined by bilateral agreement for both prime brokerage and OTC derivatives. According to the ISDA Margin Survey for 2009, the eligible collateral at the time of the crash was predominantly US dollar cash, euro cash and US Treasury securities."

http://londonbanker.blogspot.com/2011/05/concentration-manipulation-and-margin.html

One reader comment to that blog posting speculates that the four global banks that fomented this $2 trillion dollar margin call were Goldman, JP Morgan, Deutsche Bank, and UBS (I have no way to independently verify this comment, just pointing it out because that reader comment may answer the question that London Banker is not willing to explicitly state, i. e. who are those four global banks?)