Greece...

Generali

FTBFun wrote: »

Liverpool's sponsors?

No. Not that I'd tell you if you had it right :-)

Graham_Devon

Generali wrote: »

No. Not that I'd tell you if you had it right :-)

You still getting your money out!?

Generali

kabayiri wrote: »

Now I understand why these CDS products and other financial exotica were developed by so called 'rocket scientists' and whizz kids.

The thing about a rocket is that it sounds great when you design it, but when you come to use it, very little of the original rocket returns.

Perhaps financial products should be designed by Intensive Care nursing staff. They have longstanding experience of keeping a patient alive but on life support.

The thing is, CDSs are even that exotic. They're effectively just insurance policies.

ILW

Generali wrote: »

The thing is, CDSs are even that exotic. They're effectively just insurance policies.

But it appears that quite often without the assets to pay up if and when required.

Generali

Graham_Devon wrote: »

You still getting your money out!?

Something like that. I'll take a hit if I'm right and there's nothing I can do about it.

Anyway, enough on that part of my post. Let's stick to haircuts and CDSs.

tomterm8

Generali wrote: »

The thing is, CDSs are even that exotic. They're effectively just insurance policies.

CDS are not insurance policies. With an insurance policy, there is a legal requirement that you own an insurable asset. In other words, you can't insure your neighbours shed, you can only insure your own shed (and even then, you only get back the actual cost of replacing the shed).

Basically, there is a good reason for the law to restrict insurance in this way, because otherwise it would make burning down your neighbours shed quite a lucrative business strategy.

At it's heart this is part of the problem: it is more lucrative for the creditors of Greece to force a default, than agree to any restructuring even if this restructuring would result in Greece paying back more money on their bonds over the longer term.

kabayiri

Generali wrote: »

The thing is, CDSs are even that exotic. They're effectively just insurance policies.

Agreed, but I don't have anything fun to say about insurance salespeople.

We have seen a wave of PPI mis-selling in the UK...it's definitely the no-blame claim in vogue right now. The claims companies love it because they take 30% for sending off a few forms and stuff.

Will we see CDS mis-selling when people realise they don't pay out ?

heathcote123

The_White_Horse wrote: »

why should private investors write off their debt. Let the IMF and the EUROZONE write off their debt!

In any event, Greece should have to pay back every last penny it borrowed and if her people starve and riot in the process, so be it. They took it, now pay it back.

Typical country run by lefties. Borrow borrow borrow. Don't worry about collecting tax, paying the debt back - just borrow more.

About time these morons learnt a lesson.

And with our debt at £1trn and growing, the lefties are stitching us up nicely here. But never fear, the lefty still wants more benefits, a bigger public sector, higher public sector wages and more generous pensions. and what is more, the fact they don't generate a single penny to pay for it is irrelevant. they are ENTITLED.

Do I detect a slight dislike of the left?

pqrdef

The_White_Horse wrote: »

In any event, Greece should have to pay back every last penny it borrowed and if her people starve and riot in the process, so be it. They took it, now pay it back.

Now you're being ridiculous. Countries never pay off their debts, they just keep rolling them over.

Do you think the UK has any plans to pay off its debts?

Greece's problem is that it can no longer do the rolling-over thing. That's because the eurozone managed things so badly that it trashed the credit ratings of several member countries.

And the other members' credit ratings have now started going down the same tube, because the eurozone has not yet accepted the logic of the situation - no country can be responsible for its own debts while the Germans are managing its currency.

The eurozone is going to have to understand that if member countries won't guarantee each other's debts it will end with none of them except Germany being able to borrow any money.

Mr_Mumble

Graham_Devon wrote: »

But the plan is to then simply replace the debt that's been written off with new debt, and that solves the current issues?

I can't be reading this right?

That's been the plan since the initial second bailout proposal (on July 21st 2011) expecting pensioners, insurers and banks to take a loss on their investments. You can see the document here:
http://www.scribd.com/doc/60643408/IIF-Financing-Offer

Investors got a variety of choices but they effectively meant choosing to take on Greek debt for a longer period and at far lower, than current, market interest rates. The plan unraveled very quickly when it was pointed out the cost to Greece would be higher since they had to pay money to the EFSF to insure against the default of the new bonds.

It has been disaster after disaster ever since as can be seen by the key financial instrument for Greece at present: the Greek government bond that matures on March 20th and could lead to default:



http://www.borsaitaliana.it/borsa/obbligazioni/mot/euro-obbligazioni/scheda.html?isin=GR0110021236&lang=it

Think of the poor sods who invested in this bond a year ago paying more than 90 Euros for each, notional, 100 Euro bond! The losses have been so big because private investors have been subordinated by the ECB/EU/IMF chucking new money at the problem and saying we get paid back first in the event of default.

Scenarios:

If this March bond rallies sharply the politicians have delayed yet again and bottled the decision to make investors take a loss. North European taxpayers are the big losers in this scenario while the big winners would be hedge funds that have bought in the past month or two.

If the bond keeps bumbling along and slowly fall to around 25-30 (the price of longer maturity Greek bonds) then it is a sign that private investors will not get their money back and default will take place by mid-March (won't go into the details of type of default here!).

If we get to March 20th and the bond instrument is valued around 10-15 cents on the Euro - this'd be a sign of Greece leaving the Euro area and paying out any compensation in new Drachma, highly unlikely but plausible.

Anyway, it's another month where Greece wil go bankrupt next month if they don't get their next tranche of funds. So of course, they will get their funds regardless, but is this honestly how they are "fixing" things?

They're not fixing things, all they're doing is delaying the inevitable - that's very good for current politicians who can retire or go on speaking tours but its not so good for citizens of Euroland - be they Greeks who're made to suffer years of purgatory or Germans who're made to pay for it. Simple but painful solution: variable exchange rates with the periphery leaving the Euro and until the populous realises that the charade continues.