tag:blogger.com,1999:blog-14963913.post578233840144549684..comments2023-10-27T20:27:57.900-04:00Comments on Kid Dynamite's World: Speculators Are Not the Reason Greece Has ProblemsKid Dynamitehttp://www.blogger.com/profile/17475987512856310577noreply@blogger.comBlogger8125tag:blogger.com,1999:blog-14963913.post-9249462030840644012010-03-15T17:20:45.696-04:002010-03-15T17:20:45.696-04:00with acrossthecurve gone, we are trying to fill th...with acrossthecurve gone, we are trying to fill the void. come check us out www.bondsquawk.commikehttp://www.bondsquawk.comnoreply@blogger.comtag:blogger.com,1999:blog-14963913.post-20902948576536059232010-03-10T21:43:04.884-05:002010-03-10T21:43:04.884-05:00BWDIK: i really don't want to belabor this po...BWDIK: i really don't want to belabor this point, but "From the politicians point of view, the speculators are making them pay more for their refunding" is exactly the falsehood.<br /><br />Greece has to pay more for their refunding because their finances suck balls. not because speculators are buying CDS on Greek debt. that's my point.Kid Dynamitehttps://www.blogger.com/profile/17475987512856310577noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-5521843138491001162010-03-10T20:03:52.969-05:002010-03-10T20:03:52.969-05:00Thanks for the comments, KD. While I would agree ...Thanks for the comments, KD. While I would agree that the speculators can't "burn Greece down" for the insurance money, they can create an atmosphere where refinancing costs are higher than they otherwise would be. From the politicians point of view, the speculators are making them pay more for their refunding (and making them cut their handouts) by talking bad about them--justified or not, they're not going to be happy about it, and undoubtedly are going to snarl at those meddlesome kids. . .But What do I Know?noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-55550855763590130582010-03-10T16:37:03.954-05:002010-03-10T16:37:03.954-05:00BWDIK - this is a very important distinction that ...BWDIK - this is a very important distinction that i've mentioned before, and it's the main reason the "buy insurance on your neighbors house and then burn it down" analogy is total crap.<br /><br />i can buy CDS on Greece, and be incented to see Greece fail, but, and here's the key - I CANNOT MAKE IT FAIL. i cannot burn down Greece's house. <br /><br />now, there are very specific, rare circumstances where if i own the underlying debt (and i think this is much more applicable to corporations), and over-insure it with the CDS, I can actually burn the house down when the bankruptcy negotiations happen and, as a debtholder, I force bankruptcy. But i addressed this in an earlier post:<br /><br />http://fridayinvegas.blogspot.com/2009/11/abstract-thoughts-on-cds-and-fallacy-of.htmlKid Dynamitehttps://www.blogger.com/profile/17475987512856310577noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-73710950457014072972010-03-10T11:14:20.786-05:002010-03-10T11:14:20.786-05:00Thanks, KD. I wouldn't liken the CDS buyers t...Thanks, KD. I wouldn't liken the CDS buyers to an inspector, but to someone who would benefit from the rotten-porch diagnosis (maybe an inspector with a porch repair business on the side who threatens to report you to the local authorities.) The CDS buyers are not dispassionate observers--a helpful neighbor who points out that the porch is rotten--but rather players who are looking to get paid from the situation. <br /><br />I'm not saying they shouldn't get paid, but rather their motivations are not purely informational. . .<br /><br />As for how long the "extend-and-pretend" game "should" go on--be careful what you wish for. Maybe we're all better off with some illusions and not the "truth." Right now the truth could be pretty painful--as much as we'd like to believe that we personally could handle it, I'm not sure society could.But What do I Know?noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-76284733096404290112010-03-10T09:55:48.489-05:002010-03-10T09:55:48.489-05:00BWDIK - that's an ok start, but we can improve...BWDIK - that's an ok start, but we can improve on the metaphor: the "cds speculators" don't break your porch - they are, if anything, the messengers. I'd liken them to the inspector that comes in and says, "hey - your porch may have a serious problem - you should probably think about trying to fix it"<br /><br />preventing the inspector from looking at your porch doesn't make your porch any stronger - and eliminating CDS doesn't change the finances of the underlying entity - although it MAY allow the extend and pretend game to continue longer than it otherwise would/should have.Kid Dynamitehttps://www.blogger.com/profile/17475987512856310577noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-16058622309316655272010-03-10T07:44:02.821-05:002010-03-10T07:44:02.821-05:00Can I try to parse the differences here? When the...Can I try to parse the differences here? When the politicians say that the speculators are responsible, what they mean is that the game of extend-and-pretend was going along fine until the specs came in an demanded more money (higher interest rates). There is an element of truth in this. On the other hand, the speculators would argue that the house was already crawling with termites and all they did was spot an opportunity to buy some cheap insurance on it. There is also an element of truth in this.<br /><br />I guess my point is that when you have an unstable back porch at your house, whose fault is it if it collapses when the neighborhood ruffians come over and jump up and down on it? The people who own the house say the damage was caused by the hoodlums and the hoodlums say the porch was rotten.<br /><br />There's probably a better metaphor for this situation, but since each side can blame the other with some element of truth, arguing about it is pointless (in the sense of arguing to find a solution, not to deflect blame.)But What do I Know?noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-91972012692390080012010-03-09T09:24:38.681-05:002010-03-09T09:24:38.681-05:00Everybody and I mean everybody knew that Greece sh...Everybody and I mean everybody knew that Greece should not have been allowed into the EU/Euro. That was a reckless move done for political reasons.<br /><br />And the EU/Euro need to face the consequences of all the cheating that went on (by almost all members) to meet the Maastricht treaty in the first place. And to face the consequences of never really defining the implicit guarantee by the ECB and EU member countries to bail out the weak countries.<br /><br />Wait, overexpansion due to dubious political goals, book cooking and undefined implicit guarantees? That sounds like Fannie and Freddie too!Yangabangahttps://www.blogger.com/profile/01602946300256374843noreply@blogger.com