the finance industry / wall street

germany may not want to help bail greece out but thats exactly what its doing, uncertainty as to whether they will keep doing it is whats causing the fear which is resulting in the charmingly named 'bank jog' of euros flowing out of at risk nations banks to more robust ones

god the euro is such a piece of shit

this is an aside but i think france has 3-4x as much exposure to greek debt as germany

exposure to grek debt isnt really the issue because greece isnt really a v big economy, the issue is if the eurozone lets greece default then people start to wonder if theyll let italy and spain default too, which are obvs much larger/dangerouser economies

I guess I thought, though, that Germany's concern is that it DOESN'T especially want to be a part of the saving of those countries, i.e. Germany's fear isn't "don't let them default" it's "don't force me to help rescue them."

oh yeah germany has been actively rescuing greece for a while, and of course they dont want to, who wants to bail out these lousy greeks

basically for the euro to survive imho they have to change their charter so that theres an explicit pledge to bail out to the bitter end any failing member countries, just like massachusetts bails out mississippi every year, this if you take the logic far enough would kinda require europe to become one country

better tho i think would be to somehow peacefully unwind the euro if thats at all possible, because then i could afford to travel to spain and eat paella

anyway this stuff is all v fascinating and confusing and even really smart experts cant seem to agree, i hope it works out not terrible

but also w/cheap paella

its just a dumb idea to have countries not be able to control their own currency, what were they thinking

also like letting greece in w/o noticing that they were totally lying abt everyone and had really a sham economy

shoulda had an exit strategy, or tighter centralized controls. idea pretty great though.

i am sorry to interrupt the greek euro talk i don't understand but holy fuck goole's link about dental fraud!

ok the point i was getting at is that for all the german whining the french have put in about 3-4x as much bailout money as well

idea pretty great though.

― Fas Ro Duh (Gukbe), Wednesday, May 23, 2012 7:08 PM (2 seconds ago) Bookmark Flag Post Permalink

idk if the idea was that great like what exactly is the big benefit

yeah it is weird that the french havent been whining more, its unlike them xp

this if you take the logic far enough would kinda require europe to become one country

which as I understand it was the whole point in the first place/was expected to happen as the next logical step but lol sovereignty and yes, paella.

If it had been done properly then a single currency and stronger, linked economies could have given Europe a chance to have more power against the dollar and the gargantuan US economy that basically everyone had to be subservient to for a while.

yeah i guess it just keeps coming back to linked economies really require linked governments

i'm no rah rah cheerleader for capitalism but as i understand it, it is a force that desires flow and loathes national boundaries, so the notion of one large economy running through separate cultural identities etc could have been an interesting experiment for our globalised future but now i think maybe collective farming is the way to go

done properly would have meant a federal political union as well as a shonky economic one but i think they were in a bit of a hurry.

exactly, which is why they needed a tighter centralized control xpost

i do think its cool how they got countries to take some of their nastier laws off the books

having all of europe vote on one parliament or w/e would be the greatest political spectacle in the world

they do have a degree of that with the MEPs and all, it just needed more definition. given the Europeans though they might have instinctively gone back to some insane Holy Roman Empire style central power with loads of largely autonomous principalities jibing each other. if you've ever played Europa Universalis III, you'll know how messy that can get.

wwIII for sure

there could have been a way, politically, maybe, but i imagine there would be a lot of speechifying from disgruntled right-wingers, touting the horros of Bratwurst on the Champs-Elysees or Baguettes lining the Appian Way.

So what does Germany want though? Do I understand correctly that they'd basically like Greece to not need a bailout AND not default, i.e. "austerity"?

this is p good

http://www.cnn.com/2012/05/21/opinion/frum-euro-crisis/index.html?iid=article_sidebar

although I don't really like the conclusion of "no one knows...therefore...BAAAAD"

well austerity is a condition for the ongoing bailout, germany would like greece to do what it says and in return theyll continue to give them money

oh fine u hate yeglesias but u like frum *rolls eyes*

thats a p good piece actually but it kinda dances around how insane things would get if spain left the euro

like this is all spanish banks failing simultaneously: Financial institutions that have bought Spanish credit-card debt (or Spanish mortgages or whatever) may discover equally shockingly late that their bonds also will not and cannot pay off in full.

His explanation of what leaving the euro would do to local commodities like housing and labor vs. "tradable" stuff was helpful

it's kind of overstating the case when it says "shockingly late that their bonds ..." because the surprise isn't there anymore. out of that 130 billion euro bailout, 100 billion of it is from investors writing down the greek bond debt. so when they talk about building an additional 700 billion euro firewall around europe what they're talking about is preparing to write down other big chunks of debt.

I'd be very surprised if anyone owns bonds backed by Spanish credit-card debt and is not extremely aware of the risks at this point.

I wonder who was smart enought to buy up Credit Default Swaps on all this debt early on.

This is a decent article about European bank exposure to a Greek exit:

http://www.bloomberg.com/news/2012-05-22/european-banks-unprepared-for-pandora-s-box-of-greek-exit.html

a fair amount of CDS on European debt is euro-denominated, so there's that too... (wrong-way risk, they call it)

http://av.r.ftdata.co.uk/files/2012/05/Estimated-cost-of-Grexit-Nomura-1024x612.png

huh so these gargantuan cds contracts don't contain some kind of exchange risk provisions?

http://news.firedoglake.com/2012/05/25/sec-ends-probe-into-lehman-brothers-without-taking-action/

I think Hurting 2 led the investigation. Just joking (and yea its the SEC and not Justice ...)

The officials have weighed issuing a public report on their findings that would stop short of an enforcement action while highlighting the firm’s questionable conduct.

hurting: i don't know the numbers. most european cds is USD, but for a time, a fair amount was euro.

A passage that struck me in The Big Short this morning:

"One of the reasons that Wall Street had cooked up this new industry called structured finance was that its old-fashioned business was every day less profitable. The profits in stockbroking, along with those in the more conventional sorts of bond broking, had been squashed by internet competition."

Sort of set off a light bulb for me. Wall Street would rather have the predictable profits from its old-fashioned businesses -- the old "make other people's money work for you" adage. Profits whether the market goes up or down. Profits from transaction costs. It's when that model is put at risk that Wall Street starts thrashing around and doing crazier, more risky things. It's almost like a gambler doubling down.

Can you give me a timeline here? Does old-fashioned mean when Glass-Stegall still existed?

alphaville iama on reddit. good reading: http://www.reddit.com/r/IAmA/comments/uflwl/iama_reporter_on_the_financial_times_alphaville/

When E-trade (or Scotttrade, Ameritrade, Fidelity, Schwab, etc.) advertise $9.99 for unlimited share amount transaction fees, its worth noting that Merrill Lynch et. al. in the 70s used to make around $150 for the first 100 shares traded and a sliding percentage of total dollar amount thereafter. Trading was expensive, investors had to buy and hold, and brokers went out of their way to seek new clients and sometimes even keep them happy to ensure future commissions.

Additionally, stock prices used to be quoted in 1/4th, 1/8th and sometimes 1/16th of a dollar, ensuring that the spread between bid and ask that the brokerage could pocket if they were doing a interclient trade was at least $0.06 and usually more like $0.25, per share. With decimalization of share prices, the spread on liquid securities has dropped to fractions of a penny.

The disintermediation of discount, and later, internet trading totally destroyed the business model of the brokerage industry.

But to detail what went wrong in the CIO, Dimon has repeatedly promised to be an “open kimono” — a phrase that we hope he will wean himself off.

http://ftalphaville.ft.com/blog/2012/06/22/1056901/jpm-to-host-face-to-face-analyst-meeting-after-q2-earnings/

oh lord