Global Debt Time Bomb explodes soon

[williaty]

My 2 cents thrown into the quarter conversation: Ever notice how this thread gets a lot more posts on certain days?

What, you mean how this thread and the Greece thread blow up ever time the market opens with a free-fall

[Tater Raider]

My 2 cents thrown into the quarter conversation: Ever notice how this thread gets a lot more posts on certain days?

What, you mean how this thread and the Greece thread blow up ever time the market opens with a free-fall

We have a winner!

[williaty]

My 2 cents thrown into the quarter conversation: Ever notice how this thread gets a lot more posts on certain days?

What, you mean how this thread and the Greece thread blow up ever time the market opens with a free-fall

We have a winner!

It's kind of interesting, though, that the Greece thread is the cause of the free-falls and this thread is caused by the freefalls. We should just skip the who mess of having Wall St. and ruin the economy right here on ZS!

[Kommander]

We should just skip the who mess of having Wall St. and ruin the economy right here on ZS!

Excellent idea! Hans, reactivate the Panzer Divisions. Were going on holiday!

[SeerSavant]

We should just skip the who mess of having Wall St. and ruin the economy right here on ZS!

Excellent idea! Hans, reactivate the Panzer Divisions. Were going on holiday!

Okay, that was probably in poor taste...





http://www.reuters.com/article/2012/05/23/markets-usa-bonds-idUSL1E8GN8P320120523

NEW YORK, May 23 (Reuters) - U.S. Treasuries prices rose on
Wednesday as concerns over repercussions from a possible Greek
exit from the euro zone increased demand for safe haven U.S.
debt.
Euro zone officials have told members of the currency area
to prepare contingency plans in case Greece decides to quit the
bloc, an eventuality Germany's central bank said would be
"manageable."
"Comments like that set you up for another round of risk
reduction," said Carl Lantz, an interest rate strategist at
Credit Suisse in New York.
"I don't think the markets in general are set up for a Greek
exit. You don't know the unknown unknowns and the knock-on
effects and the kind of capital controls that would go along
with that. It is a very worrisome proposition," he said.
U.S. Treasuries yields have risen off recent lows this week
as a lack of negative headlines allowed investors to consolidate
positions from a two-month rally in bonds. New risk aversion may
send yields back to retest their historical lows.

http://www.reuters.com/article/2012/05/23/markets-global-idUSL1E8GN9G320120523

NEW YORK, May 23 (Reuters) - World stocks skidded and the euro fell to a 21-month low on Wednesday on worries about Greece's possible exit from the euro zone, which threatened to deepen the region's debt crisis and hurt an already fragile global recovery.

Nervous investors piled into low-risk U.S. and German government debt, sending their yields lower. The dollar also was favored as a safe haven by investors.

Each euro zone country will have to prepare a contingency plan for the possibility of Greece's leaving the bloc, three euro zone sources told Reuters, citing an agreement reached by officials.

A scramble for low-risk investments enabled Germany to pay no interest on 5 billion euros in new two-year debt amid the absence of new measures to tackle the region's debt crisis from a European leaders' summit in Brussels.

"The markets are on edge and sensitive to every possible out-of-control scenario coming out of Europe," said Peter Boockvar, equity strategist at Miller Tabak & Co in New York.

Europe's leaders were expected to discuss boosting growth at a dinner meeting on Wednesday, as well as the idea of a joint euro-zone bond. French President Francois Hollande supports the bond plan, but German Chancellor Angela Merkel opposes it.

"Most are expecting no concrete solution out of the meeting, just a few ideas discussed on how to boost growth with no real commitment to carry them out, while Angela Merkel is almost certain to reject any proposal by Francois Hollande in relation to euro bonds," said Craig Erlam, market analyst at Alpari.

Perception of a stalemate between the leader of the euro zone's most powerful member and heads of other bloc countries unleashed selling of their common currency and shares worldwide.

I have this weird knee jerk reaction that when everyone keeps using word like potential, or Uncertain, the words carry a far different meaning than what Websters would quote...

[DarkAxel]

Looks like big European Funds are dumping their Euro holdings.

http://edition.cnn.com/2012/05/25/business/europe-funds-dump-euro/index.html?hpt=hp_t3

Some of Europe's biggest fund managers have confirmed they are dumping euro assets amid rising fears over a possible Greek exit from the eurozone and single currency turmoil.

The euro's sudden fall this month caught many investors by surprise. Europe's single currency has lost 5 per cent in the past three weeks after barely moving against the US dollar for much of the year. On Thursday, the euro hit a fresh 22-month low at $1.2514.

US-based Merk Investments, the currency specialists, has cut all of its euro holdings in its flagship fund this month.

"We sold our last euro on May 15," said Axel Merk, chief investment officer. "We're concerned about how dysfunctional the process is. No one is there to talk to in Greece."

Amundi, which manages money for some of the continent's biggest pension funds and companies, said the risk of the crisis spreading to the bigger economies of Spain and Italy was growing because policy makers had failed to convince investors it had built a sufficient firewall.

Other big fund managers fear the likelihood of a so-called "Grexit", in the event of Athens leaving the euro, has risen sharply in the past week.

European leaders put off any decisions on shoring up the region's banks at a late-night summit on Wednesday despite rising concerns that instability in Greece was undermining confidence in the eurozone's financial sector. Citigroup says the euro could fall close to parity in the event of a disorderly exit.

Richard Batty, investment director at Standard Life Investments which has been underweight in European equities and bonds for the past two years, said: "This is a crisis that looks like worsening and that is why the euro has come under pressure."

Neil Williams, chief economist at Hermes Fund Managers, which has reduced its exposure to European peripheral equities to close to zero, said: "There is a failure by the politicians to convince the markets they are tackling the problems in the eurozone."Trading desks at investment banks say that asset managers and pension funds in particular have been selling the euro in recent days.

Amundi, which was created through a merger of Crédit Agricole Asset Management and Société Générale Asset Management three years ago and has €659bn in assets under management, has switched some of its money out of euro-denominated bonds into dollar assets.

Eric Brard, global head of fixed income at Amundi, said: "Although we have reduced our exposure to the euro, a weaker euro could be good news for Europe and exporting companies in the region."

He added: "Our baseline scenario is that the eurozone will not break up and Greece will remain in the monetary union. However, taking a pragmatic view, in recent weeks the market's perception of risks of a eurozone break-up and Greece exiting have risen."

Threadneedle, which has £73bn under management, has reduced its euro exposure through its absolute return fund in the belief the euro will fall further.

[Blacksmith]

Economic growth in China has completely stalled this year. I think I posted in this thread earlier about the over construction boom they were having there. They have built entire cities there that no one can afford to live in because they never developed a solid middle class. The other shoe is starting to drop there. Construction jobs are disappearing.

If China back pedals and stops buying US debt to support the government supported US economy things will get ugly. The money markets could lock up again.

We still don't know about the US tax bomb that could happen at the end of this year. Lot of politics involved.

[SeerSavant]

US tax bomb?

Anyway to explain without getting into the politic side?

[raptor]

Yes. Certain tax rate reductions were put in place in 2001. They were temporary and set to expire in 2011.

In 2010 these tax rates were temporarily extended until 2013. Thus in 2013 no one is sure what tax rates will be used.

It could make dividends ordinary income again as well as raise capital gains rates (to name just two) and thus greatly increase the tax burden on the economy. This will hurt any economic recovery. This expiration date to make maters more political was set to coincide with the presidential election. This ensures that bitter partisan debate will take place and we may see another stalemate like that which occurred in the budget argument.

[Blacksmith]

With the huge expansion of debt the US has created this giant self feeding monster. The only simple way I know to look at it is:

If they break the economy with taxes there won't be any taxes to collect. If they don't stop borrowing money we will never be able to pay it back. The US will absorb all the free capital in the world and eventually Keynes will be proved wrong (or at least not unlimited).

A bitter partisan debate (if short) might be a good thing if the sides ended up in favor of some kind of balance; but it won't. The politics involved however are likely to be bloody. Everyone with a vote has to bring home the bacon for their district and at the same time cut back. They have to increase collections without cutting into the pockets of their big backers or their voting blocs.

There are too many conflicting interests to represent them all so the ones most likely to suffer will be the unborn. I honestly think that is why we are where we are today. With households with kids being in the smallest minority of households in US history voters are much less concerned about offspring and their opportunities for success than at any time in US history.

[SeerSavant]

Thanks....



Self Edit....
deleted angry tirade that pushed into political boundaries... Not right or left, just.... disgusted....
Served no real purpose to the thread.





More and more, I feel as if this thread is probably one of the most valuable threads on the forums, So, in case I hadn't said it before, I do appreciate everyone's knowledge, understanding, and involvement in helping folks like me, understand the scope and complexity of what really is a shitty situation...
Understanding a thing is paramount to preparing for it...

[raptor]

Self Edit....
deleted angry tirade that pushed into political boundaries... Not right or left, just.... disgusted....
Served no real purpose to the thread.

The sad part is that is that solving this problem is in everyone's best interest. We all have a stake in the outcome and all of our interest are aligned in this matter.

[SeerSavant]

And yet, for the most part, it's our collective self interests that seem to guide us.

No one seems to see or acknowledge the consequences of our actions... just what benefits us at the moment...

[Blacksmith]

Self Edit....
deleted angry tirade that pushed into political boundaries... Not right or left, just.... disgusted....
Served no real purpose to the thread.

The sad part is that is that solving this problem is in everyone's best interest. We all have a stake in the outcome and all of our interest are aligned in this matter.

As a country yes, hell as a world yes. But as individuals? Hell no that is someone else's problem.

No one seems to see or acknowledge the consequences of our actions... just what benefits us at the moment...

I was hoping for the emergence of a leader. Often times in a crisis one will emerge. Of course the alternative happens just as often I suppose.

[Valarius]

I don't know why. The whole anti/pro bailout thing just made it seem apropos.


Non-Joke Edit:

Spain may recapitalize Bankia (their biggest bank) with government bonds, in exchange for shares. Sorta like what we did...?

http://www.reuters.com/article/2012/05/ ... FB20120527

[Kommander]

I was hoping for the emergence of a leader. Often times in a crisis one will emerge. Of course the alternative happens just as often I suppose.

Be careful what you wish for.

[SeerSavant]

I was hoping for the emergence of a leader. Often times in a crisis one will emerge. Of course the alternative happens just as often I suppose.

Be careful what you wish for.

Second.



People tend to follow the leader that promises them what they want the most, with as little pain involved, and as much benefit as can be gained... it's probably part of the human nature...
Which is the reason we are in the position we are in today...

Don't trust in anyone who tells you what you think you want to hear.


yeah... I'll just stop there.

[Doctorr Fabulous]

HITLER










...would even agree that this is getting dangerously off topic/pseudopolitical.

[Blacksmith]

...would even agree that this is getting dangerously off topic/pseudopolitical.

The whole thread is pseudo-political as it deals with multi-national government economic policies.

People tend to follow the leader that promises them what they want the most, with as little pain involved, and as much benefit as can be gained...

For run of the mill average leaders that is.... however, great leaders most often successfully promote sacrifice as a way of achieving a greater good or some kind of higher vision during times of great distress (such as in the case of Hitler with a 1000 year rule or Churchill's survival of England). Once the crisis is gone the leader is quickly dismissed (or killed) if possible by the people who were unhappy with the sacrifice or opposed to the leader's goals.

In this case however it won't happen anyway. The issues are too complex for stakeholders to form a bargaining agreement or garner popular support and none of the sides trust each other. No one will appear to deal with this problem because the solution involves some sacrifice and nobody is willing to give any ground. Children don't have much of a voice in our society and those representing them are the smallest in number as at any time in our history. That is why I think they will be the ones to bear the weight of our over indulgence. You can only kick the can down the road so far.

The best we can hope for is to keep an eye on the situation and be ready for when the other shoe drops. Since the situation is now significantly worse than it was when the thread started and has yet to be dealt with the solution is that much more difficult.

[phil_in_cs]

Man made problems are inherently political. Problems come when people start to advocate a particular political opinion or goal.

"The anti bail out party looks to win. If they win and reject the bail out, then blah blah blah" <- ok

"the anti bail out party should win so they can stick it to the Germans" <- not ok

Almost all sources are saying if the bail out is rejected there will be chaos in Greece; implying a strongman would rise from that reflects more a knowledge of human history than a political ideal. There are even articles discussing the secondary effects - since the EU allows easy immigration between member nations, a collapse in one could result in mass migrations to others. British papers were discussing this yesterday, and what could be done to stop or slow this since jobs are tight there already. Advocating a position is not allowed - stating what the parties what and who is likely to win is ok.

[Blacksmith]

since the EU allows easy immigration between member nations, a collapse in one could result in mass migrations to others.

I think things would have to get really, really bad to trigger that. Most people of average resources won't move like that unless they have no other choice or are motivated by a really great opportunity.

[Krustofski]

HITLER










...would even agree that this is getting dangerously off topic/pseudopolitical.

You're hilarious at times.

since the EU allows easy immigration between member nations, a collapse in one could result in mass migrations to others.

I think things would have to get really, really bad to trigger that. Most people of average resources won't move like that unless they have no other choice or are motivated by a really great opportunity.

Yes, this. The main barrier would be language. Low-qualification wage slaves can make do with "hello/bye/yes/no/yessir/I don't understand/where's the toilet/one beer please", educated people who want to use their training in a decent job, not so much.

[Pilsung]

http://www.zerohedge.com/news/spain-bun ... ke-450-bps

Spanish financial implosion gathering force. Greece is small potatoes compared to Spain and Italy.

[Pilsung]

http://www.bloomberg.com/quote/IBEX:IND

Spainish markets are tanking this morning, with banks getting creamed.