Greece...

gagahouse

AndyGuil wrote: »

The ECB get money from the banks. Most of their funding comes from German banks. The is not printed money and it takes money out of the system reducing liquidity.

Oh, so the banks give/lend money to the ECB so that they can borrow it back with a haircut in exchange for collateral via the LTRO? yes ok, I see you haven't the foggiest what I am talking about, I will leave it at that.

posh*spice

Paulson & Co., the $23 billion hedge fund run by John Paulson, said Greece may default by the end of March, triggering the breakup of the euro.

http://www.bloomberg.com/news/2012-02-15/paulson-says-euro-will-probably-unravel.html

Of course he might be wrong

AndyGuil

gagahouse wrote: »

Oh, so the banks give/lend money to the ECB so that they can borrow it back with a haircut in exchange for collateral via the LTRO? yes ok, I see you haven't the foggiest what I am talking about, I will leave it at that.

The point is the money has come out of the system to go to Greece. This is not printing money. If Greece go under then the ECB will have issues and will probably lose its credit rating. The Eurozone issue will get worse and the ECB will go down with the rest. The money has been leant not printed.

ILW

worldtraveller wrote: »

Some Greece numbers courtesy of the BBC:



BBC News

maybe if they had been collecting their taxes over the last decade, things would have been different.

Degenerate

AndyGuil wrote: »

The point is the money has come out of the system to go to Greece. This is not printing money. If Greece go under then the ECB will have issues and will probably lose its credit rating. The Eurozone issue will get worse and the ECB will go down with the rest. The money has been leant not printed.

The money has been both lent and "printed". Much as with the British QE, the money was created at the central bank by an entry in a ledger, and lent out with the promise of future repayment. The distinction between money creation and normal central banking operations is not as clear-cut as you think. Mario Draghi has taken advantage of this to instigate a sort of back-door QE-like scheme with the LTRO. It has it's limitations though.

The problem with the ECB is that it has no legal mandate for permanent money creation, which means it couldn't just eat a loss like the BOE could. In theory, if enough of these loans become delinquent, the ECB could become technically insolvent and have to present a bill to all the member states to make up the loss. Because of these limitations, it is obliged to demand collateral for these loans, and this is the scheme's Achilles heel. Although the ECB is being more and more lenient with it's collatoral demands, ultimately banks will run out of anything suitable and be unable to borrow more. What's more, the pledging of assets as collatoral leaves them unavailable for use in the interbank market, making everyone completely dependent on the ECB.

Contrast this with British QE, where the BOE is buying assets out of the market by purchasing UK Government bonds, so effectively lending to the Government. By doing this, cash is being pushed out onto bank balance sheets with no collatoral required. It's one step away from pure debt monetisation, because the balances remain on the books demanding repayment at some future date. In theory, the UK Government could default and the BOE would have to eat the loss, but in practise this would never happen as the BOE is ultimately under Government control and can postpone repayment indefinitely with further QE.

Generali

worldtraveller wrote: »

Some Greece numbers courtesy of the BBC:



BBC News

1, 2 & 5 are pretty shocking numbers. 3 & 4 are meaningless without a lot of clarification.

For #3 I reckon everyone in the world is at risk of poverty if they are either poor to start off with, unlucky or dumb.

#4 is pretty wooly too. I would imagine that countries where large numbers of people are in the sort of poverty that Europeans only ever see fleetingly on the news would view meat for the poor to be an occasional luxury. The idea that 80% of poor people were eating meat 3-4 times a week would likely be seen as a strange sort of poverty.

Great signature BTW.

gagahouse

Degenerate wrote: »

The money has been both lent and "printed". Much as with the British QE, the money was created at the central bank by an entry in a ledger, and lent out with the promise of future repayment. The distinction between money creation and normal central banking operations is not as clear-cut as you think. Mario Draghi has taken advantage of this to instigate a sort of back-door QE-like scheme with the LTRO. It has it's limitations though.

The problem with the ECB is that it has no legal mandate for permanent money creation, which means it couldn't just eat a loss like the BOE could. In theory, if enough of these loans become delinquent, the ECB could become technically insolvent and have to present a bill to all the member states to make up the loss. Because of these limitations, it is obliged to demand collateral for these loans, and this is the scheme's Achilles heel. Although the ECB is being more and more lenient with it's collatoral demands, ultimately banks will run out of anything suitable and be unable to borrow more. What's more, the pledging of assets as collatoral leaves them unavailable for use in the interbank market, making everyone completely dependent on the ECB.

http://ftalphaville.ft.com/blog/2012/01/10/825031/unlisted-in-euroland/?updatedcontent=1

Read this and you will see how they are trying to cover this eventuality also. Look at the expansion of new eligible instruments for France and Italy in particular.

Graham_Devon

Graham_Devon wrote: »

Apparently this will be sorted out and the bailout back on in the next few hours.

Hours has now turned into days. "Likely" decision on Monday.

AndyGuil

Degenerate wrote: »

The money has been both lent and "printed". Much as with the British QE, the money was created at the central bank by an entry in a ledger, and lent out with the promise of future repayment. The distinction between money creation and normal central banking operations is not as clear-cut as you think. Mario Draghi has taken advantage of this to instigate a sort of back-door QE-like scheme with the LTRO. It has it's limitations though.

The problem with the ECB is that it has no legal mandate for permanent money creation, which means it couldn't just eat a loss like the BOE could. In theory, if enough of these loans become delinquent, the ECB could become technically insolvent and have to present a bill to all the member states to make up the loss. Because of these limitations, it is obliged to demand collateral for these loans, and this is the scheme's Achilles heel. Although the ECB is being more and more lenient with it's collatoral demands, ultimately banks will run out of anything suitable and be unable to borrow more. What's more, the pledging of assets as collatoral leaves them unavailable for use in the interbank market, making everyone completely dependent on the ECB.

Contrast this with British QE, where the BOE is buying assets out of the market by purchasing UK Government bonds, so effectively lending to the Government. By doing this, cash is being pushed out onto bank balance sheets with no collatoral required. It's one step away from pure debt monetisation, because the balances remain on the books demanding repayment at some future date. In theory, the UK Government could default and the BOE would have to eat the loss, but in practise this would never happen as the BOE is ultimately under Government control and can postpone repayment indefinitely with further QE.

The money has been taken out of the system mostly from German banks and poured into the bottomless pit of Greece who will pay back interest etc. There has been no creation of money anywhere, it is very different from QE as we have seen in the UK and US where money was created and added to the system increasing liquidity. However it is not increasing liquidity, so no benefit of QE and no inflation. The Greeks will default and that money will vanish. It is therefore not printing money.

LTRO gets its money from the ECB that gets its money from countries without printing.

"There are several problems, which include Germany wanting to have more control over the Greek budget in the future, since it will be mostly German taxpayers who will be funding the bailout. Also the Greek politicians are not supportive of the addition austerity measures, facing elections in April; maThere are several problems, which include Germany wanting to have more control over the Greek budget in the future, since it will be mostly German taxpayers who will be funding the bailout. Also the Greek politicians are not supportive of the addition austerity measures, facing elections in April; many political leaders are more concerned with re-election that demands from the EU and IMF."
http://www.fxstreet.com/fundamental/analysis-reports/weekly-crosses-fundamental-outlook-/2012/02/06/

This is why they do not print. http://www.guardian.co.uk/commentisfree/2011/dec/22/germany-ecb-national-psyche-hyperinflation

Again no printing happening. http://www.reuters.com/article/2011/11/18/us-eurozone-germany-westerwelle-idUSTRE7AH06I20111118

It is against EU treaty to print. http://www.cnbc.com/id/46004803/Greek_PM_on_ECB_Don_t_Print_Money

drc

If Greece does default on March 20th, will this mean that Italy, Spain, Portugal will definitely default too? I understand that their debts are too big for them to be bailed out. Is that correct? If so, surely there is going to be absolute chaos in the coming months/years for the whole of Europe, not just the Eurozone?