Sovereign debt bubble thread

[Zanza]

I was confused by your comment "We all lost Billions"  At first I thought you meant We as in we Europeans since the article is about a European funded bail out.

Now it appears you meant We as in non Europeans but I am happy to point out that We Canadians did not lose Billions because We Canadians have sane regulation.

Greece will get Canadian taxdollar's via the IMF.   

[Valmy]

Greece will get Canadian taxdollar's via the IMF.  

Where is your sanity now?

[Tamas]

Well the deal is fine and indeed the half-default actually caused happiness rather than panic.

That said: the whole thing is about letting Greece have a Horrendously And Crippingly Huge deficit instead of an Unrepayable And Cripplingly Huge deficit, and color me unconvinced about the long term political resolve in a country where people burn their capital because public sector benefits come down from heaven and decrease to well-off-rich-country standards.

Plus the solution, as I see, is to have the strong countries create a fund from which they will give more loans to countries when they can't repay the previous loans they gave them. I know there is no better way for it sans hitting the reset button on the world's financial system, but the whole deal still clings on Europe-wide fiscal conservatism and discipline for years to come.

[crazy canuck]

I was confused by your comment "We all lost Billions"  At first I thought you meant We as in we Europeans since the article is about a European funded bail out.

Now it appears you meant We as in non Europeans but I am happy to point out that We Canadians did not lose Billions because We Canadians have sane regulation.

Greece will get Canadian taxdollar's via the IMF.   

Not bloody likely.

[Zanza]

Not bloody likely? Really?

The IMF has directly loaned Greece 30 billion Euro and has pledged another 250 billion Euro to the EFSF. To allow it to do the latter, Canada has borrowed the IMF 10 billion US dollar in 2010. As far as the general funds of the IMF go, Canada has a quota of 2.68% on the SDRs, so as far as I understand the IMF mechanisms, Canada would be exposed with another about 800 million Euro from the first loan. Unless the IMF gets all its money back from Greece - which I would call "not bloody likely" - and the other broke Euro countries like Portugal and Ireland that got IMF money - not bloody likely either, Canada will eventually lose money on this. And probably a 10 digit figure.

[crazy canuck]

Canada hasnt borrowed anything. 

[Zanza]

Meh. That's a false friend. The German word for lend sounds like borrow, that's why I confuse it sometimes.

[crazy canuck]

Meh. That's a false friend. The German word for lend sounds like borrow, that's why I confuse it sometimes.

There is a joke in there about why the Euros are in so much trouble atm.

[MadImmortalMan]

Just read an interesting commentary:

It was a good thing that the EU took so long. Why? Because no one was surprised by the Greek partial default anymore and thus there was no chaos in financial markets - quite the opposite, there was relief that it was finally spelled out in the open. If they had immediately cut the debt by 50% in early 2010, when all of this started, the financial markets would probably have been in turmoil like after the Lehman crash. But give them one and a half years to prepare and no one panics.

Don't know what market that guy's looking at. I've seen nothing but chaos out there for the past couple months. It's been jackknifing back and forth on every unsubstantiated rumor coming out of the EU.

[Zanza]

Don't know what market that guy's looking at. I've seen nothing but chaos out there for the past couple months. It's been jackknifing back and forth on every unsubstantiated rumor coming out of the EU.

What do think would have happened if the EU/Greece had announced a 50% haircut on Greek debt in March or April 2010 when all of this started? That was his comparison.

[Neil]

Wahoo!  We all lost billions!

But only half the billions that would have been lost, at least for now.

Of course, it will all happen again in the near future.  Europe is finished.

[Admiral Yi]

Greece will get Canadian taxdollar's via the IMF.   

The IMF's finances are terribly complicated and the only person who fully understands them is Palmerston, but generally speaking the IMF's power to lend comes from member central banks, not treasuries, so it's not a charge on tax money.

[Zanza]

What happens if the Bank of Canada's balance sheet takes a hit? Do they just print money to fill the gap or does the government inject new capital? The latter is how it is done here, which would eventually make the tax payer liable again...

[Richard Hakluyt]

Greece will get Canadian taxdollar's via the IMF.   

The IMF's finances are terribly complicated and the only person who fully understands them is Palmerston, but generally speaking the IMF's power to lend comes from member central banks, not treasuries, so it's not a charge on tax money.

But Palmerston is now long dead, just like Prince Albert and even the insane German professor must have passed away long ago 

[Admiral Yi]

What happens if the Bank of Canada's balance sheet takes a hit? Do they just print money to fill the gap or does the government inject new capital? The latter is how it is done here, which would eventually make the tax payer liable again...

First of all I don't think central banks that issue fiat currency ever have to worry about their balance sheets and never need recapitalization.

Second it's longstanding IMF policy not to forgive or write off loans.  Greece has defaulted but the full dollar amount of the IMF loan will stay on their books. 

There have been exceptions for Highly Indedted Poor Countries (HIPC) like Mozambique but I think we're talking chump change.