Sovereign debt bubble thread

[Zanza]

Clearly not.  The coercive element and risk of tax evasion rests with the state, as it should.

The only way not to pay VAT here is to starve to death. That's pretty coercive.

[Sheilbh]

Clearly not.  The coercive element and risk of tax evasion rests with the state, as it should.

The only way not to pay VAT here is to starve to death. That's pretty coercive.

What's that got to do with an electricity company cutting off someone's power because they didn't pay their property taxes?

Do you maybe have some Latin blood in you Shelf? 

  If only.  Today was very sunny and my Englishness is, alas, very clear 

[Zanza]

What's that got to do with an electricity company cutting off someone's power because they didn't pay their property taxes?

You only get the service/product when you pay your taxes. 

[Sheilbh]

You only get the service/product when you pay your taxes. 

But that's a tax on the good you're buying, this is totally unrelated.  It's like if you couldn't buy something from Tesco because you hadn't paid your speeding ticket.

[Zanza]

So rename it to electricity tax.

[Admiral Yi]

But that's a tax on the good you're buying, this is totally unrelated.  It's like if you couldn't buy something from Tesco because you hadn't paid your speeding ticket.

Tesco is a private company.  Surely Greek unitilities are state-owned.  Every other goddamn thing in the country is.

It's more like saying you can't attend public university if you're deliquent on taxes.

[Sheilbh]

Tesco is a private company.  Surely Greek unitilities are state-owned.  Every other goddamn thing in the country is.

Again I think there's probably a fair bit of ignorance and preconceptions about how much of Greece is state owned.  The biggest energy company is 51% owned by the state.  But they're not the entire market and they've got successful competitors, like ENEL.  It's like a more private Electricite de France (85% state owned but competing a private market).

Edit:  Also lots of state owned companies operate under private law.  They're not necessarily emanations of the state

[citizen k]

Are The Europeans About To Start The Second Half Of Our Great Depression?

"Just when we think the worst is over - and let's face it we have been in this crisis for five years - we get the second half; are the Europeans about to start the second half our Great Depression with massive bank runs" are the Jaws-music-inspired words that recent media-favorite (yes, us too) Niall Ferguson uses in an interview with CBC [10]. His main concern is that this kind of (bank-run) event can quickly spiral out of the control of even the ECB as he uncomfortably conjures the image of the initial US stabilization that occurred in 1930 to May 1931 only to be knocked back into a greater depression by the failure of Credit-Anstalt, which set off bank failures and eventually defaults in 1932 on many government debts. The deposit run potential is the single-biggest reason to care about Greek-exit - in itself it is not large enough economically to interfere with global growth but it is the message and contagion that it sends that is critical in bringing forth a pan-European banking crisis and implicitly spilling over to the US and Asia via global trade and banking transmission channels. An excellent brief interview that summarizes the exact fears that face Europe and implicitly the US, explains the rather simple solution of fiscal federalism and the fact that today's German politik is very different from 1989's Helmut Kohl-era with regard to their commitment to the Federal outcome. His conclusions are worrisome. Germany is the key - and there is not a good understanding of financial markets in Berlin.

Six minutes well-spent on a Saturday evening...
http://www.cbc.ca/video/#/News/TV_Shows/Lang_&_O%27Leary_Exchange/1308689786/ID=2239470660

Europe is a part of North America's destiny because the financial systems are so intertwined - and remember even the all-knowing Fed massively under-estimated the second-order effects of Lehman.

    "It's a total fantasy to think that the meltdown that I am discussing that could happen in a matter of weeks would not have a major impact on North America's prospects of sustained recovery."

[Jaron]

Europe is the most fiscally mismanaged continent on Earth.

[Iormlund]

The government won't issue bonds to meet the €19 billion needed to rescue Bankia as it did in previous bail outs. Instead, it will give it new bonds directly, and the bank will use them as collateral at the ECB.

[Neil]

The government won't issue bonds to meet the €19 billion needed to rescue Bankia as it did in previous bail outs. Instead, it will give it new bonds directly, and the bank will use them as collateral at the ECB.

Tricky.  And is the ECB obliged to accept the junk bonds?

[Sheilbh]

Spanish government's briefing that the ECB's accepted the idea. 

[Iormlund]

The government won't issue bonds to meet the €19 billion needed to rescue Bankia as it did in previous bail outs. Instead, it will give it new bonds directly, and the bank will use them as collateral at the ECB.

Tricky.  And is the ECB obliged to accept the junk bonds?

No, but imagine the consequences if the ECB said Spanish debt is no longer valid collateral.

[Zanza]

I am not particularly good in accounting, but how does giving them government bonds that they use to get cash from the ECB recapitalize the bank? It doesn't seem to change the equity and just gives them a bit of liquidity.

[Admiral Yi]

I am not particularly good in accounting, but how does giving them government bonds that they use to get cash from the ECB recapitalize the bank? It doesn't seem to change the equity and just gives them a bit of liquidity.

Perhaps the bonds were traded for equity?