Sovereign debt bubble thread

[Tamas]

Unless you`re Chinese.

I am growing more and more impatient with that fuckin' urban myth.

China is politically a hellhole, making a killing from loaning slaves to western companies and/or selling their shit to the mass-consuming developed world. And their citizens who has risen out of slave status are probably entangled in their very own housing bubble.

The moment real shit hits the fan in the 1st world, China will go fuckin' belly up.

[MadImmortalMan]

Time to start the fights again.

Aug. 26, 2011, 5:36 a.m. EDT
Collateral spat sparks new Greek default fears
Finland's insistence on getting collateral stirs controversy


By William L. Watts, MarketWatch

FRANKFURT (MarketWatch) — Little more than a month after euro-zone leaders presented a united front on a second rescue package for Greece, a spat over collateral and other issues is renewing fears of a potential default.

Finland last week reached a deal with Greece that would see Athens provide cash guarantees in return for Helsinki's participation in the 109 billion euros ($157 billion) rescue plan. That caused an uproar in capitals across Europe, with Austria on Wednesday saying it would ask the collateral terms to be applied to all countries participating in the plan.

Germany has said it can't back a plan that favors Finland over other countries.

Subsequent talk has centered on the possibility of coming up with a plan that would see Greece offer collateral to all bailout participants. European officials will discuss the issue later Friday, Greek Finance Minister Evangelos Venizelos told the country's parliament, Dow Jones Newswires reported.

Regardless of the outcome, the conflict marks a "very, very dark episode in policy-making in Europe," said Piet Lammens, head of markets research at KBC Bank in Brussels.

The incident signals that Greece's euro-zone partners don't believe the package will ensure the country's solvency, sending a decidedly negative message to bond markets, he said.

The collateral controversy has in turn renewed fears of a possible Greek default. Greek bond yields soared anew, with the two-year yield trading well above 40% this week.

The cost of insuring Greek government debt against default via instruments known as credit default swaps, already extremely elevated, rose further. The annual cost of insuring $10 million of Greek debt rose $92,000 on Friday to $2.3 million, according to data provided by Markit.

The euro , however, has remained largely immune to the recent controversy, holding near the top end of its recent price range versus the dollar and changing hands at $1.4445 in recent action, a gain of 0.5% on the day.
Finland's demands

After weeks of wrangling and market turmoil, European officials on July 21 reached an agreement on a €109 billion bailout program designed to meet Greece's funding needs into 2014.

Greece's hopes of returning to the bond market in 2012 after last year's €110 billion bailout were dashed as its economy tanked and tax revenues failed to allow it to meet deficit-reduction targets. Moreover, officials also moved to revamp the European Financial Stability Facility, or EFSF, giving it the power to buy bonds in the secondary market.

The collateral dispute has its origins in that July 21 agreement. At the time, Finnish Prime Minister Jyrki Katainen demanded a collateral arrangement with Greece in return for Helsinki's participation, noted Mujtaba Rahman, European analyst with consulting firm Eurasia Group.

Katainen, who took office after a divisive election in April, had little choice amid rising opposition to participating in a new bailout within his own coalition and among Finnish taxpayers.

The joint leaders' statement issued at the end of the summit noted that "where appropriate, a collateral arrangement will be put in place so as to cover the risk arising to euro-area member states from their guarantees" to the European Financial Stability Facility.

But the plan was for Finland and Greece to reach an agreement, which would then be discussed for approval by the rest of the euro zone. Instead, details of the Finnish collateral arrangement leaked early, sparking protests from other euro-zone countries.

It underlined the ongoing "coordination and communication deficit" that has marked European leaders' efforts to tackle the crisis, Rahman said.

At this point, the most likely option is that Finland doesn't participate in the bailout but remains a contributor to the EFSF, he said, but warned that the controversy threatens to cause a "ripple effect" across the euro zone as national parliaments prepare to debate changes to the EFSF and other related measures.

Olli Rehn, the European Union's commissioner for economic affairs, has called on governments to wrap up technical details regarding changes to the EFSF by early September.

German Chancellor Angela Merkel on Thursday raised eyebrows when she cancelled a planned trip to Russia in early September in order to help push proposed EFSF changes through parliament.

The European Central Bank, meanwhile, is expected to continue purchasing Italian and Spanish government bonds in an effort to hold down borrowing costs for the euro zone's third and fourth-largest countries. The ECB stepped into the market earlier this month, helping drive 10-year yields, which had topped the 6% level in both countries, back below 5%.

Nicholas Spiro, managing director of Spiro Sovereign Strategy in London, dismissed notions that the latest turmoil marks a threat to the survival of the euro.

Despite trepidation among taxpayers over the cost of euro-zone bailouts, the political imperative to maintain the euro remains strong, he said. Meanwhile, the European Union is following a longstanding pattern that has often seen it resolve conflicts and challenges in a drawn-out and often messy fashion.

Leaders of the euro zone's AAA-rated "saviors" realize they will have to pay up as the region becomes more integrated and are currently focused on negotiating the best possible terms for a "more civilized fiscal regime," he said.

Unfortunately, it will probably require more market turmoil for the euro zone to ultimately get its act together, Spiro said.

And swaps:

Name   Level   Change   Time
Portugal   1020   -20 (-2%)   17:00
Italy   377   3 (0.8%)   17:00
Ireland   830   -3 (-0.3%)   17:00
Greece   2250   42 (1.9%)   17:00
Spain   375   2 (0.6%)   17:00

[Josquius]

Unless you`re Chinese.

I am growing more and more impatient with that fuckin' urban myth.

China is politically a hellhole, making a killing from loaning slaves to western companies and/or selling their shit to the mass-consuming developed world. And their citizens who has risen out of slave status are probably entangled in their very own housing bubble.

The moment real shit hits the fan in the 1st world, China will go fuckin' belly up.

It`s an urban myth that things are getting increasingly better in China?

[DGuller]

Chinese are in fact very unhappy, they just don't know it.

[Razgovory]

Unless you`re Chinese.

I am growing more and more impatient with that fuckin' urban myth.

China is politically a hellhole, making a killing from loaning slaves to western companies and/or selling their shit to the mass-consuming developed world. And their citizens who has risen out of slave status are probably entangled in their very own housing bubble.

The moment real shit hits the fan in the 1st world, China will go fuckin' belly up.

Since China is a semi-closed society, it's difficult to know what's going on there.  It's not as bad as the Soviet Union was, but it's still not transparent.  In my mind China is in a state of flux.  10 years from now it could be like Russia in the 1990's, the same as it is today, or even a thriving new Democracy.  I suspect that some kind of drastic political change will occur in China in the next few decades.  The last 20 years have shown us that one party states like China don't have the longest shelf life.  Ideally, China will follow Taiwan's example in gradually removing one party rule and slowly evolve into a real (if idiosyncratic), democracy.  I don't know how likely that is.  Deng strengthened China immensely by resigning.  It wasn't Washingtonian in scope, but it was an excellent example.  I'm of the opinion that Deng should be regarded as the greatest Chinese statesman of the 20th century.  Though that's not to difficult considering the piss poor leadership China has seen the 20th century.

[Neil]

How is a democracy of that size and savagery supposed to thrive?

[jimmy olsen]

How is a democracy of that size and savagery supposed to thrive?

India's democracy has survived and they have been in cold/hot war with Pakistan the whole time.

[Neil]

How is a democracy of that size and savagery supposed to thrive?

India's democracy has survived and they have been in cold/hot war with Pakistan the whole time.

Survive != thrive, and those little skirmishes are irrelevant.

India is controlled by various party machines who tell the illiterate scum who to vote for, and run by people descended from Nehru.

[Zanza]

Deng strengthened China immensely by resigning.  It wasn't Washingtonian in scope, but it was an excellent example.  I'm of the opinion that Deng should be regarded as the greatest Chinese statesman of the 20th century.  Though that's not to difficult considering the piss poor leadership China has seen the 20th century.

Deng is generally regarded as the greatest Chinese statesman of the 20th century.
The Chinese have a system whereby the top of the Communist Party rules for ten years and is then replaced by the next generation, so the two-term limit rule applies as well.

[Razgovory]

Deng strengthened China immensely by resigning.  It wasn't Washingtonian in scope, but it was an excellent example.  I'm of the opinion that Deng should be regarded as the greatest Chinese statesman of the 20th century.  Though that's not to difficult considering the piss poor leadership China has seen the 20th century.

Deng is generally regarded as the greatest Chinese statesman of the 20th century.
The Chinese have a system whereby the top of the Communist Party rules for ten years and is then replaced by the next generation, so the two-term limit rule applies as well.

Cult of personality is still focused on Mao, and Deng was thought to have had considerable influence after retirement.

[Razgovory]

How is a democracy of that size and savagery supposed to thrive?

Why wouldn't it?

[Valmy]

Deng strengthened China immensely by resigning.  It wasn't Washingtonian in scope, but it was an excellent example.  I'm of the opinion that Deng should be regarded as the greatest Chinese statesman of the 20th century.  Though that's not to difficult considering the piss poor leadership China has seen the 20th century.

Deng is generally regarded as the greatest Chinese statesman of the 20th century.
The Chinese have a system whereby the top of the Communist Party rules for ten years and is then replaced by the next generation, so the two-term limit rule applies as well.

Just curious how do people feel about Sun Yat-Sen these days?  Such a pity cancer got him young.  Who knows how things might have gone otherwise.

[Razgovory]

Deng strengthened China immensely by resigning.  It wasn't Washingtonian in scope, but it was an excellent example.  I'm of the opinion that Deng should be regarded as the greatest Chinese statesman of the 20th century.  Though that's not to difficult considering the piss poor leadership China has seen the 20th century.

Deng is generally regarded as the greatest Chinese statesman of the 20th century.
The Chinese have a system whereby the top of the Communist Party rules for ten years and is then replaced by the next generation, so the two-term limit rule applies as well.

Just curious how do people feel about Sun Yat-Sen these days?  Such a pity cancer got him young.  Who knows how things might have gone otherwise.

I think he is highly respected by the communists for fulfilling some kind of Marxist prophecy or something.

[Scipio]

Chinese are in fact very unhappy, they just don't know it.

The problem with that sentence is that you think the Chinese are people, when in fact they are the Chinese.

[MadImmortalMan]

Spain close to passing budget amendment.

Spain moves closer to constitutional budget deficit cap


Spanish politicians have overwhelmingly backed holding a vote on introducing a constitutional cap on budget deficits.

The move all but guarantees that the change will be adopted.

Members of the lower house of Spain's parliament voted 319 in favour and only 17 against holding the debate and vote later this week. The reform would then go to the upper house next week.

To change Spain's constitution requires three-fifths support in both houses.

The proposed reform calls for the broad principles of a balanced long-term budget to be enshrined in Spain's constitution.

It adds that the deficit limit could only be breached in times of natural disaster, recession, or extraordinary emergencies - and then only with approval of the lower house.
Public protests

"We have to take a coherent and forceful decision to strengthen our country's solvency," said Jose Antonio Alonso, spokesman for the ruling Socialist Party.

"There is no better way to dispel uncertainties than to elevate the principle of budget stability to the level of constitutional mandate so as to consolidate in the world a clear reality - we are a reliable country in the payment of our debts and there should be no doubt about it."

In 2010 Spain had a budget deficit equivalent to 9.2% of its annual economic output or GDP.

It is now continuing with cost-cutting measures to reduce this to 6% this year, and aims to reach the European Union target of 3% by 2013.

The government's work to lower the budget has come in the face of widespread public protests.

It the reform is based by both houses of the Spanish parliament it would only be the second time that Spain's constitution has been amended since it was first drawn up in 1978.

Germany already has a legal limit on its budget deficit level, and France is exploring the idea.

At the beginning of August, US politicians agreed to increase the country's prescribed debt level in an 11th hour deal.

The International Monetary Fund (IMF) warned last month that the Spanish economy still faced "considerable" risks.

It said the Spanish government had to continue work to reduce public spending and increase efforts to liberalise its jobs market.

Spain currently has an unemployment rate of 21% - the highest in Europe.

There have been concerns that Spain may have to follow Greece, the Republic of Ireland and Portugal in needing a bailout fund from the European Union and IMF.

CDS dropping except Greece:

Name   Level   Change   Time
Portugal   970   -62 (-6%)   14:30
Italy   372   -7 (-1.9%)   14:30
Ireland   815   -22 (-2.5%)   14:30
Greece   2250   74 (3.4%)   14:30
Spain   370   -6 (-1.6%)   14:30