Sovereign debt bubble thread

[Sheilbh]

Greek employment figures were out today.  Their unemployment rate is actually better than Spain's at around 21%, the youth unemployment rate, though, is 51%

[Tamas]

lolz, 1988:

Ron Paul: A $220 Billion dollar deficit last year by "conservatives?" I mean, there's something wrong going on here.

Ron Paul: That's why they need the federal reserve system - in order to monetize all of this debt as well.

William F. Buckley: Well, you don't have to monetize the debt as long as you have foreign capital willing to to take it up.

Ron Paul: They do monetize a bit of it too, but what happens when Japan quits buying our debt, which they probably will soon, and then there is going to be a monetary crisis on top of a stock market crisis?

William F. Buckley: When that happens, you can run for office and be elected.

http://www.calibratedconfidence.com/2012/02/ron-paul-and-william-f-buckley.html

[PJL]

Back to Greece - latest news is that 75% of bondholders will agree to the deal, which means that CACs will need to be imposed, and the ratings agencies will declare Greece to be in default.

[Tamas]

correct me if I am wrong, but it has been declared that the swap will not trigger a CDS event?

[PJL]

correct me if I am wrong, but it has been declared that the swap will not trigger a CDS event?

Only if at least 90% of the bondbolders take it up. Otherwise it will be considered an orderly default.

[Zanza]

One of them has already declared Greece to be in selective default.

[PJL]

Looks like Greece is going to default tomorrow now, or least it's the least worst option, according to Robert 'Dr Strangelove' Peston in his latest article

http://www.bbc.co.uk/news/business-17304618

[Zanza]

With unchanged Eurozone membership, the only method of adjusting costs and prices in Med-Europe to be competitive without extreme and constantly reinforced austerity, leading to depression, would be stimulation of rapid inflation in The Netherlands and Germany for a decade or two; and acceptance over that adjustment period of large fiscal subsidy payments to the deficit countries – not loans to be repaid later, but unrequited transfers.

Won't happen.

I know, which is why I said  a few months ago:

...I'd say breakup of the EZ is now the most likely scenario. I can't see enough political will to keep it together.

And in another thread I wrote this:

But if an open-ended, unlimited fiscal transfer or imperial administrators being sent from Brussels to right Greece's economy or the central bank losing its independence and mandate not to finance governments is what it takes to keep it together, I am not sure if that price isn't too high.

There only seem to be terrible options left and I am not sure which of the various terrible options is better. I am starting to think we should cut our losses and end the whole thing here and now.

[PJL]

Scrap whatever I said about Greece defaulting (orderly or otherwise) tomorrow. They are 100% guarenteed to the get the 90% take up, since the Greeks are adding up the numbers themelves. 

[Tamas]

Scrap whatever I said about Greece defaulting (orderly or otherwise) tomorrow. They are 100% guarenteed to the get the 90% take up, since the Greeks are adding up the numbers themelves. 

gotta' be kidding me 

[Iormlund]

There only seem to be terrible options left and I am not sure which of the various terrible options is better. I am starting to think we should cut our losses and end the whole thing here and now.

Yeah. I'm not as "optimistic" about exit as the Lombard report, but I can't see a viable alternative.

The masterminds behind the Euro thought it would force us to drop national biases and advance toward a united Europe. Time has proven them terribly wrong. Nationalism is alive and well, and the result from this experiment is much poorer, euroesceptic Europe.

[Admiral Yi]

Heh. How can a nation-wide 20/30% reduction in wages NOT result in depression?

It can't.  What I'm disputing is whether equilibrium after that reduction requires continuous, ongoing contraction of the economy.

[Iormlund]

Heh. How can a nation-wide 20/30% reduction in wages NOT result in depression?

It can't.  What I'm disputing is whether equilibrium after that reduction requires continuous, ongoing contraction of the economy.

The problem is we don't even know where that equilibrium is, if it exists at all.

[MadImmortalMan]

It would have to exist somewhere. The problem is it might be a lot farther off than we want it to be.

[Admiral Yi]

The problem is we don't even know where that equilibrium is, if it exists at all.

It should be somewhere around the point where unit labor costs are equal.