End game Europe approaching.

Well here’s my working theory:

  • Greece is brought through an ordered sovereign default to 30%/40% of current debts
  • Greece’s creditors fight over the spoils
  • Sovereigns (eg NTMA etc) have to shore up any losses from sovereign exposure to the Greek default. A “Greece default levy” is added to PAYE slips all over the world
  • ECB runs a “compensation fund” for any banks - Greek, French, Landesbank, non-European - affected

Geithner and Trichet get to isolate the Greek default and leave it to the next guy to tip over precarious banking/CDS house of cards (with Italy or whoever).

Greece itself will be put into a state of emergency. It will receive fixed funding amounts on short schedules and will not be permitted to go over, so there will be periods of blackouts etc. Possible anarchy, but the banks will be OK. And witnessing anarchy will dissuade the other PIGS from following the Greek example.

There will be no immediate effect on Ireland. The rules will be (1) The ECB rescues the banks in the event of a sovereign default. (2) The country rescues the banks in the case of a banking crisis. (There won’t be another banking crisis because of (1), but we’ll be stuck with the one we have.)

(I’m not saying it’s a good theory now…)

Yanis Varoufakis, Greek Economics Professor, predicting the end of the Euro on “Tonight With Vincent Browne” on TV3.

Crikey. He was even more bleak than our local bunch of Economics Profs.

WGU, you are a genius.

I’ll go dig up Soc Gen et al’s numbers. The AIG edgar was pretty interesting. Looks like a controlled liquidation. Should be all shut down in 3 or 4 years as all the contracts are let run out. The $65B notional would probably translate into < $1B real. Which by this stage in the game is how much the Fed loses down the back of the sofa after a particularly boisterous Friday evening beer bust.

Well, it always looks like the end of something bigger when your tiny rat-infested sewer collapses. Are Greece and Ireland systemic? Probably not. Are they symptomatic of what could be wrong in Italy and Spain respectively? That’s the concern, I reckon…

UBS, already bailed out, and after announcing 3500 job losses, is back in the news for all the wrong reasons:

Peter Brown, from The Irish Institute of Financial Trading, was on also and he was raging with Yanis.

You could see they both thought the other was the devil incarnate.

I can imagine. I must have a listen back to it. There’s a faux inevitability about some things that are going on.


Sure what’s a few billion between friends?

A billion here and a billion there, pretty soon you’re talking about serious money…

(attributed to Senator Everett Dirkson)

Indeed. I was left wondering if Yanis is future John McHale.

Bloomberg TV is suggesting the UBS loss was related to a derivative position on the Swiss Franc, which may only have taken “seconds” or “minutes”.

EDIT: 31 y.o. man arrested in London

That is monetary sterilization in action…

Put a couple of trillion into the worlds financial system to replace the couple of trillion that disappeared with the collapse of the shadow banking system. Who then promptly deposit it back into the central bank system.

The same thing happened back in the 1930’s.

That’s why the hyper-inflationists get it so wrong. They have a very simplistic model of how the real world works. Lots of money printed is not equal to huge increases in general prices. There again, so do the central bankers. Huge amounts of liquidity do not solve debt solvency problems. Which is why the massive liquidity injections by the central banks in the 1930’s did not work either.

European treasury needed to avoid Depression: Soros → reuters.com/article/2011/09/ … me=topNews

Don’t panic. We must be careful not to talk ourselves into an early winter. Mr. Olli Rehn said nice things about the Irish climate so there you go. The Happy Gilmore index is at ninety, so you should all stop worrying and go out and spend money.

Everyone is pulling a Bertie these days blaming the doom and gloomers for the doom and gloom, Even Helicopter Ben is at it.

I heard someone on Bloomberg TV this morning explaining how “it’s not just a European problem any more”…

The arse has well and truly fallen out of the bucket. Only for Lehman’s, Seannie and the boys could have held on!

Only for Lehman’s!