Greece. Been Lied To .... £14,640/family might be the real amount.

PasturesNew

Britain could be hit with losses of up to £366billion from the collapse of the Greek economy, it has emerged.
The potential devastation of banks and other City institutions would be equal to 24 per cent of our annual national output, or £14,640 for every family in the UK.
Ministers had claimed that British banks have 'only' £2.5billion of exposure to Greek government debt, while the Bank of England says the potential losses would be just £8billion.


.....


Experts accused ministers of underestimating the true scale of the risk to the UK, as Channel 4 News revealed that estimates of potential exposure range as high as £366billion.

Danny Gabay, of Fathom Financial Consulting, which calculated the figure using data from the Department of Business, said: 'It's not the direct loan that’s the problem, it's the derivatives of those loans which can go on to be multiples of the actual original size of the loan.
'London made a vast amount of money in the ten years before this crisis selling those loans. Those chickens may now be coming home to roost.'

http://www.dailymail.co.uk/news/article-2006539/Greek-debt-crisis-cost-UK-335bn.html

Generali

I suspect the problem is the difference between net and gross exposure. If you owe me £10 and I have £9 of insurance against you failing to pay me, my gross exposure to your debt is £19 but my net exposure (ie my potential loss if you don't pay and my insurance pays out) is £1.

Which is the more accurate way to define how much risk I'm taking?

vivatifosi

Generali wrote: »

I suspect the problem is the difference between net and gross exposure. If you owe me £10 and I have £9 of insurance against you failing to pay me, my gross exposure to your debt is £19 but my net exposure (ie my potential loss if you don't pay and my insurance pays out) is £1.

Which is the more accurate way to define how much risk I'm taking?

I have no idea how insurance is structured Gen, but out of interest, could we go back to the situation of several years back where the Lloyds names are practically obliterated? If structure is similar I would imagine that they have already taken a hit with Japan and other natural disasters. If they underwrite finance as well :eek:.

Generali

vivatifosi wrote: »

I have no idea how insurance is structured Gen, but out of interest, could we go back to the situation of several years back where the Lloyds names are practically obliterated? If structure is similar I would imagine that they have already taken a hit with Japan and other natural disasters. If they underwrite finance as well :eek:.

Well this is a slightly different sort of insurance. In this case it is in the form of derivative contracts written mostly by banks.

Now tax payers may find themselves on the hook for those derivative contracts but if they hadn't gone down the bailout route they wouldnt have had too.

The bad debts that caused the GFC haven't gone away, they've just moved from being someone else's problem to being everyone's problem.

vivatifosi

Generali wrote: »

Well this is a slightly different sort of insurance. In this case it is in the form of derivative contracts written mostly by banks.

Now tax payers may find themselves on the hook for those derivative contracts but if they hadn't gone down the bailout route they wouldnt have had too.

The bad debts that caused the GFC haven't gone away, they've just moved from being someone else's problem to being everyone's problem.

Oh crikey, so you're telling me that this is yet another game of high stakes poker like the last unravelling, where everyone has a hand of cards but can't see what they are holding. That's even more scary:eek::eek:.

purch

Experts accused ministers of underestimating the true scale of the risk to the UK

Danny Gabay, of Fathom Financial Consulting

Doncha just love "Experts" :rotfl:

vivatifosi

purch wrote: »

Doncha just love "Experts" :rotfl:

Apparently he's ex JPM and BOE. Not sure whether that makes him more or less of an expert though!

System

vivatifosi wrote: »

Oh crikey, so you're telling me that this is yet another game of high stakes poker like the last unravelling, where everyone has a hand of cards but can't see what they are holding.

What happens is this.
Loans to sub-prime countries are packaged and repackaged and mixed up with other sub-prime loans and sold on. Then they are repackaged again. By now they have stopped being sub-prime and are AAA* so can be flogged to pension funds and other gullible concerns like UK banks and the government.

Jennifer_Jane

Generali is MY expert!

So saying, have watched Newsnight last night and someone on Breakfast TV (a Greek woman who was on with John Redmond), and it doesn't seem so bad (for the UK). Doubtless I have misunderstood all this hugely, but last night they were saying that it was political rather than economic and therefore Germany would bail them out as Germany is adamant in retaining the Euro/European Union.

The woman this morning was saying the real problem is the domino effect (she had a special word for it) with Portugal and Italy being a far worse problem.

Happy to be shot down for this, as really it is complicated. Also, just don't feel there is anything I can do about it, so only half-engaged in the whole thing.

StevieJ

purch wrote: »

Doncha just love "Experts" :rotfl:

Experts and the Daily Mail, a potent combination :eek:

Generali

Jennifer_Jane wrote: »

Generali is MY expert!

So saying, have watched Newsnight last night and someone on Breakfast TV (a Greek woman who was on with John Redmond), and it doesn't seem so bad (for the UK). Doubtless I have misunderstood all this hugely, but last night they were saying that it was political rather than economic and therefore Germany would bail them out as Germany is adamant in retaining the Euro/European Union.

The woman this morning was saying the real problem is the domino effect (she had a special word for it) with Portugal and Italy being a far worse problem.

vivatifosi wrote: »

Oh crikey, so you're telling me that this is yet another game of high stakes poker like the last unravelling, where everyone has a hand of cards but can't see what they are holding. That's even more scary:eek::eek:.

Well the trouble is that the bad debt is becoming more concentrated. It was held by umpteen funds and banks. Then the Central Banks in their infinite wisdom decided to take some of that debt onto their books. Then as financial institutions went bust and were nationalised the debt became concentrated onto the books of Governments.

Now it appears that Governments aren't going to be allowed to go bust either so the debts of a few small Greek banks that nobody gives a damn about and that would have sunk without leaving a ripple behind on the surface of the capitalist pool are going to end up on the books of the German Government (in effect) along with those of Irish and Portugese banks and then perhaps Italy and Spain followed by the French too.

I keep saying it but if you take on enough debt from insolvent people you end up insolvent yourself!