A German sale of €3.44 billion of two-year bonds saw strong demand today as concerns over Greece led investors to stock up on safe-haven debt, while Portuguese treasury bills benefited from ample liquidity in the financial system.
Investors bidding for 2.2 times the amount of German bonds on offer despite the paper yielding just 0.17 per cent on average at the auction. That was lower than the 0.29 per cent yield at last month's auction.
After Germany was left unscathed by last week's mass rating downgrade by Standard & Poor's, the sale was better bid than December's, when the bid-to-cover was 1.4.
"It is confirming that there is an interest in the safety of the German bonds no matter what the level of yield is," Alessandro Giansanti, rate strategist at ING said.
"The fact that there is a lot of uncertainty first of all on what is going on with the debt exchange in Greece is fuelling safety bids."
So nations like Portugal pay 5% while we pay only 0.17% on our bonds? That's below inflation rate. Holy crap, we might just save enormous amounts of money on our deficit the longer this crisis does go on. No wonder Merkel does not like Eurobonds.
I think with this situation it is only right that we shoulder the majority of the burden now.
Whoever says "education does not matter" can try ignorance
------------
A decision must be made in the life of every nation at the very moment when the grasp of the enemy is at its throat. Then, it seems that the only way to survive is to use the means of the enemy, to rest survival upon what is expedient, to look the other way. Well, the answer to that is 'survival as what'? A country isn't a rock. It's not an extension of one's self. It's what it stands for. It's what it stands for when standing for something is the most difficult! - Chief Judge Haywood
------------ My LPs
Yeah, we have reached an effectively negative rate. IMHO we should use the opportunity to buy the PIIGS' bonds at rates that are fairer to them. That way we get to take in a couple of % p.a., lessen the pressure on these governments, and they will (literally) be massively indepted to us.
This is pre-WWII. You can sort of tell from the sketch style, from thee way it refers to Japan (Japan in the 1950s was still rebuilding from WWII), the spelling of Tokyo, lots of details. Nothing obvious... except that the upper right hand corner of the page reads "November 1931." --- Simon_Jester
They already are massively indebted to us, but I see your point. I think we can well afford purchasing until we reach inflation rate again, or at the very least continue to refinance our debt but step up aid. Chances are we will have to do so anyway, so why not jump ahead and market it as a sort of stimulus package for poorer countries?
Whoever says "education does not matter" can try ignorance
------------
A decision must be made in the life of every nation at the very moment when the grasp of the enemy is at its throat. Then, it seems that the only way to survive is to use the means of the enemy, to rest survival upon what is expedient, to look the other way. Well, the answer to that is 'survival as what'? A country isn't a rock. It's not an extension of one's self. It's what it stands for. It's what it stands for when standing for something is the most difficult! - Chief Judge Haywood
------------ My LPs
Doing that would make the cost of Bunds jump up again. Besides which, it suffers from the same political dangers that Eurobonds suffer from, and is less likely to actually help in the long term, because it won't be sustainable.
Maybe, but if this trend continues there is a very high chance that the pressure on Germany to do something becomes irresistable. Nations like Portugal are not going to accept that they pay 30 times as much as we do.
Whoever says "education does not matter" can try ignorance
------------
A decision must be made in the life of every nation at the very moment when the grasp of the enemy is at its throat. Then, it seems that the only way to survive is to use the means of the enemy, to rest survival upon what is expedient, to look the other way. Well, the answer to that is 'survival as what'? A country isn't a rock. It's not an extension of one's self. It's what it stands for. It's what it stands for when standing for something is the most difficult! - Chief Judge Haywood
------------ My LPs
Skgoa wrote:Yeah, we have reached an effectively negative rate. IMHO we should use the opportunity to buy the PIIGS' bonds at rates that are fairer to them. That way we get to take in a couple of % p.a., lessen the pressure on these governments, and they will (literally) be massively indepted to us.
This might save Italy, which is basically could pay off its debts were it not in a vicious circle of "They could pay off their debts at a reasonable interest rate, but not at their current one, so we need to charge higher interest rates." I'm not sure if this is so wise for the others, however.
Give fire to a man, and he will be warm for a day.
Set him on fire, and he will be warm for life.
Thanas wrote:Maybe, but if this trend continues there is a very high chance that the pressure on Germany to do something becomes irresistable. Nations like Portugal are not going to accept that they pay 30 times as much as we do.
And further empower them to make bad decisions? Portugal.. Greece... their governments are like the idiot brother in law of Europe. You want to help because you care about their kids ( in this case the citizens) but you know full well they are going to piss the money away on something stupid. So what do you do...
"This business will get out of control. It will get out of control and we’ll be lucky to live through it.” -Tom Clancy
Same thing with greece - set conditions and help them. Europe is a community, you do not let other members drown.
Whoever says "education does not matter" can try ignorance
------------
A decision must be made in the life of every nation at the very moment when the grasp of the enemy is at its throat. Then, it seems that the only way to survive is to use the means of the enemy, to rest survival upon what is expedient, to look the other way. Well, the answer to that is 'survival as what'? A country isn't a rock. It's not an extension of one's self. It's what it stands for. It's what it stands for when standing for something is the most difficult! - Chief Judge Haywood
------------ My LPs
Skgoa wrote:Yeah, we have reached an effectively negative rate. IMHO we should use the opportunity to buy the PIIGS' bonds at rates that are fairer to them. That way we get to take in a couple of % p.a., lessen the pressure on these governments, and they will (literally) be massively indepted to us.
This might save Italy, which is basically could pay off its debts were it not in a vicious circle of "They could pay off their debts at a reasonable interest rate, but not at their current one, so we need to charge higher interest rates." I'm not sure if this is so wise for the others, however.
This is pre-WWII. You can sort of tell from the sketch style, from thee way it refers to Japan (Japan in the 1950s was still rebuilding from WWII), the spelling of Tokyo, lots of details. Nothing obvious... except that the upper right hand corner of the page reads "November 1931." --- Simon_Jester
Col. Crackpot wrote:And further empower them to make bad decisions? Portugal.. Greece... their governments are like the idiot brother in law of Europe. You want to help because you care about their kids ( in this case the citizens) but you know full well they are going to piss the money away on something stupid. So what do you do...
That is far too simplistic a view of the situation. In reality, each of the different countries was in different situations before the financial crisis and is in a different situation because of the financial crisis.
The only country that was in a terrible situation both before the crisis and is now in an even worse situation is Greece. Ireland was the model state of Europe - until the financial crisis blew their banking system apart. Similarly, Spain was in a very good situation before the crisis, until it turned out a lot of that was dependent on cheap money fueling a construction boom. Italy had a lot of debt before the crisis, but was well capable of shouldering that debt - until the Euro crisis caused their interest rate to rise rapidly. I can't recall the exact situation for Portugal.
The real problem - and what has to be addressed - is the following:
Unfortunately, that goes completely against the story of the Euro-crisis being told in Germany, which means that enormous pressure will be required by the other Euro countries in order to do something about it.
Col. Crackpot wrote:And further empower them to make bad decisions? Portugal.. Greece... their governments are like the idiot brother in law of Europe. You want to help because you care about their kids ( in this case the citizens) but you know full well they are going to piss the money away on something stupid. So what do you do...
Anything but let your nieces and nephews come to harm, even if it means enabling said brother-in-law's misbehaviour.
And that's in a conventional family scenario. Your analogy breaks down somewhat when you consider the consequences for the rest of Europe. What happens when thousands of Greek and Portugese economic refugees enter the labour market in neighbouring countries who already have worryingly high unemployment? Or when the ones who can't or won't leave start rioting because food is too expensive?
There are hardly any excesses of the most crazed psychopath that cannot easily be duplicated by a normal kindly family man who just comes in to work every day and has a job to do.
-- (Terry Pratchett, Small Gods)
Replace "ginger" with "n*gger," and suddenly it become a lot less funny, doesn't it?
-- fgalkin
Skgoa wrote:Yeah, we have reached an effectively negative rate. IMHO we should use the opportunity to buy the PIIGS' bonds at rates that are fairer to them. That way we get to take in a couple of % p.a., lessen the pressure on these governments, and they will (literally) be massively indepted to us.
Can you help us out too? Canada is in a relatively good financial position but we have to pay over 1% for our bonds, you're our largest trading partner in the EU and our 5th largest overall trade partner. It's not fair that the US enjoys interest rates which are 1/5th of ours, especially considering that they're utterly bankrupt with a broken government & economy.
Speaking seriously, I don't think handing out further loans is the solution to a debt problem, I'd approach it from the other direction; debt forgiveness in return for meeting certain fiscal goals (reduce then eliminate deficits, restructure economy, etc). German banks & other institutions hold a large amount of bonds (in other words, debts) from troubled countries, if those countries can meet certain targets then a portion of those debts shall be forgiven and the banks can have the shortfall made up by the German government. Set a series of targets and write off blocks of debt as those targets are met.
This post is a 100% natural organic product.
The slight variations in spelling and grammar enhance its individual character and beauty and in no way are to be considered flaws or defects
I'm not sure why people choose 'To Love is to Bury' as their wedding song...It's about a murder-suicide
- Margo Timmins
When it becomes serious, you have to lie
- Jean-Claude Juncker
Debt forgiveness is a pretty bad idea on the grounds that it would simply shift debt from the periphery to the German government. Of couse, then the German Government can be downgraded on the basis of having taken on all that bad debt, which is what a lot of gamers want. So that is a pretty bad idea.
Whoever says "education does not matter" can try ignorance
------------
A decision must be made in the life of every nation at the very moment when the grasp of the enemy is at its throat. Then, it seems that the only way to survive is to use the means of the enemy, to rest survival upon what is expedient, to look the other way. Well, the answer to that is 'survival as what'? A country isn't a rock. It's not an extension of one's self. It's what it stands for. It's what it stands for when standing for something is the most difficult! - Chief Judge Haywood
------------ My LPs
Whoever says "education does not matter" can try ignorance
------------
A decision must be made in the life of every nation at the very moment when the grasp of the enemy is at its throat. Then, it seems that the only way to survive is to use the means of the enemy, to rest survival upon what is expedient, to look the other way. Well, the answer to that is 'survival as what'? A country isn't a rock. It's not an extension of one's self. It's what it stands for. It's what it stands for when standing for something is the most difficult! - Chief Judge Haywood
------------ My LPs
Japan's has the highest debt as a percenntage of it's GDP of any other indutrialized nation. Has to be something around 120% by now. Yet no one seems to be bothered by it as they pay a fairly low rate considering. The only explanation being that people must thek "meh.. they are Japanese, im sure they are good fo the money"
"This business will get out of control. It will get out of control and we’ll be lucky to live through it.” -Tom Clancy
Yeah I know that but I still do not get what KrauserKrauser is advocating for.
Whoever says "education does not matter" can try ignorance
------------
A decision must be made in the life of every nation at the very moment when the grasp of the enemy is at its throat. Then, it seems that the only way to survive is to use the means of the enemy, to rest survival upon what is expedient, to look the other way. Well, the answer to that is 'survival as what'? A country isn't a rock. It's not an extension of one's self. It's what it stands for. It's what it stands for when standing for something is the most difficult! - Chief Judge Haywood
------------ My LPs
Stark wrote:won't debt forgiveness programs be gamed just as furiously by financiers as any other
Yes. But unlike printing, quantitative easing, and all the other measures which have been taken to date, the countries whose debts are being forgiven will actually see some benefits. Instead of having austerity measures forced upon them and their wealth being siphoned off to foreign creditors, they're actually get to keep some capital within the country to benefit their citizens.
Thanas wrote:Debt forgiveness is a pretty bad idea on the grounds that it would simply shift debt from the periphery to the German government. Of couse, then the German Government can be downgraded on the basis of having taken on all that bad debt, which is what a lot of gamers want. So that is a pretty bad idea.
Yet Skgoa and yourself propose that Germany buy PIIGS bonds to keep their interest rates manageable...that is you're taking on their debts, and furthermore there's nothing to stop them from defaulting on said debts at some point in the future. It's one of the worst options since you're increasing your exposure on the hope that they won't default. Under my proposed solution the exposure is capped at its current level and if the economic goals are met that exposure is reduced. Additionally, the PIIGS nations aren't placed into further debt so they're have a better chance of making a recovery. Furthermore, since their bond rates aren't being artificially depressed, their rates stay higher which discourages borrowing and provides an incentive for them to balance their budgets as soon as possible.
This post is a 100% natural organic product.
The slight variations in spelling and grammar enhance its individual character and beauty and in no way are to be considered flaws or defects
I'm not sure why people choose 'To Love is to Bury' as their wedding song...It's about a murder-suicide
- Margo Timmins
When it becomes serious, you have to lie
- Jean-Claude Juncker
J wrote:
Yet Skgoa and yourself propose that Germany buy PIIGS bonds to keep their interest rates manageable...that is you're taking on their debts, and furthermore there's nothing to stop them from defaulting on said debts at some point in the future. It's one of the worst options since you're increasing your exposure on the hope that they won't default. Under my proposed solution the exposure is capped at its current level and if the economic goals are met that exposure is reduced. Additionally, the PIIGS nations aren't placed into further debt so they're have a better chance of making a recovery. Furthermore, since their bond rates aren't being artificially depressed, their rates stay higher which discourages borrowing and provides an incentive for them to balance their budgets as soon as possible.
Which furthermore validates my point of how Europe need to be careful how they handle the "idiot brother in law". Re financing his mortgage in your name to get a better rate so he can afford feed the kids is all well and good, but don't be surprised when he stops paying you on time and you can't feed your own damn kids.
"This business will get out of control. It will get out of control and we’ll be lucky to live through it.” -Tom Clancy
I was mainly referring to Germany taking on all of the PIIGS debt directly and ballooning the Debt to GDP and give their addicted cousins another hit off the crack pipe.
Germany did this in Greece in 2009, 2010, 2011 and now want to do it again in 2012? Sure, take on more debt. Become Japan and live in constant fear of the bond market.
J's solution actually allows for deleveraging.
Your solution simply relevers an over-leveraged system with more debt. Sure it will kick the can down the road but the PIIGS have a bad habit of agreeing to whatever terms will get them another hit and never delivering. Can't we actually try and let the system deflate? Sweden did it, Iceland did it, Finland did it. Short sharp correction and a clearing of the debts. Completely removes the "Japanese" end game. Paying down debt with more debt just ensures you go Japanese.
VRWC : Justice League : SDN Weight Watchers : BOTM : Former AYVB
Resident Magic the Gathering Guru : Recovering MMORPG Addict
No, J's situation does nothing but have us take on their debts without any safety net for us. As long as there still is some kind of contract backed up by secureties the risk is much slower. Lending other nation money in the hope that they repay it at some time in the future is different from that.
BTW, if any country is becoming like Japan, it is the US.
Whoever says "education does not matter" can try ignorance
------------
A decision must be made in the life of every nation at the very moment when the grasp of the enemy is at its throat. Then, it seems that the only way to survive is to use the means of the enemy, to rest survival upon what is expedient, to look the other way. Well, the answer to that is 'survival as what'? A country isn't a rock. It's not an extension of one's self. It's what it stands for. It's what it stands for when standing for something is the most difficult! - Chief Judge Haywood
------------ My LPs
KrauserKrauser wrote:Your solution simply relevers an over-leveraged system with more debt. Sure it will kick the can down the road but the PIIGS have a bad habit of agreeing to whatever terms will get them another hit and never delivering.
