Quick rundown: > ECB wants to prevent EU's central banks from buying only their own country's government bonds and redistribute the risk on the entire EU > They want to create a new financial product where the state bonds are combined together and then separated into three tranches with low, middle and high risk > The low risk tranche is affected by the default only after the higher risk tranches are exhausted > All this will be presented as a genius idea to stabilize EU's economy > Apparently there will be some document detailing this presented TODAY
Sounds familiar? It's the goddamn CDOs all over again, only this time they want to gamble with state bonds instead of real estate! And they want to slide the debt socialization within EU through the backdoor. When this blows up, 2007 crisis will feel like a walk in the park.
i hope you eurocucks are starting to learn russian and/or chinese because thats what youre gonna be speaking in 20 years, if you're not dead
Evan Johnson
I for one welcome the collapse of western societies
Alexander Moore
Poland will ignore this (((crisis)))
Owen Hughes
But will you punch some german women?
Nicholas Bennett
This does sound alarmingly like the mortgage backed securities. I suppose the question is how much demand there will be relative to the actual value of the bonds.
While I don't think this is creates the possibility of a crisis on the scale of 2007, what it does mean is that a Greece scale crisis could bring down the entire EU and leave the rest of the EU largely helpless to prevent it this time around.
Jason Campbell
I work in this area. I don’t think you quite understand the concept.
Right now, regardless of whether a bank or insurance company holds a Greek bond or German bond or French bond or Italian bond, in their internal risk analysis, the CRR, respectively, the technical guidelines for Solvency 2 say they should weight the risk as 0. Yes, the risk of holding Greek bonds by a bank or insurance company is seen as 0, no bankruptcy risk.
It’s a joke really, no bank in Europe would touch Greek bonds, even today.
The new proposed rules would change the rule so that banks and insurance companies put a more realistic risk measure on holding exposure to debt issued by an EU state... by packacking state debt and risk weighing tranches.
Isaac Diaz
So effect would be that now people will buy Greek bonds? How is it different from "now we can give loans to people who we know won't be able to pay back" in 2000's ?
Austin Walker
Mortgage backed securities originally sounded like a reasonable way to value risk. As I recall, it was the later repackaging and cross-collateralization, promising higher yields with diversified risks (but not actually risks, heh heh) that ultimately brought the entire system down.
Let's face it. Shared currencies give few non-political benefits and carry significant economic risks. The EU will eventually have a financial crisis if your leaders can't get their act together and establish a safety net like the US uses. Any half-measure like this just increases the risk of systemic collapse. Your only alternative is to kick out ALL of the risky countries, leaving, what, France, Benelux, Germany, and Finland?
Gabriel Cruz
bump
Josiah Taylor
Countries don't go bust, not like banks. Even Greece didn't collapse, since the Germans bailed them out. They're unironically too big to fail.
Nicholas Thompson
The effect would be that banks and insurance companies (insurance companies hold trillions of gov debt...) could buy a packaged product of EU state debt that provides a higher yield than German bonds and accurately reflect the risk in their models... rather than just buying any EU state debt and all weighing these at 0. I would argue it doesn’t really make Italian or Greek debt more attractive, but less attractive compared to the current 0 risk weighing. But if you abolish the 0 risk weighing model for a market risk model, without packaging EU state debt, banks and insurance companies would dump Italian and Greek and Belgian and Spanish and even French state debt into the market like crazy... because they would have to go from 0risk weighing to actual default risks for these countries which would screw up their internal risk profile and would lead to equity cushion increased demands for regulatory capital purposes.
Carter Baker
>Mortgage backed securities originally sounded like a reasonable way to value risk. As I recall, it was the later repackaging and cross-collateralization, promising higher yields with diversified risks (but not actually risks, heh heh) that ultimately brought the entire system down.
Again, the current regulatory situation in Europe says all EU state debt is 0 percent default risk. Is that a reasonable way to value risk?
Jaxon Smith
Countries go bust all the time. Greece actually defaulted on its debt, even thougg they called it a “voluntary restructuring”. Investors did not get 100 percent principal, but 25 percent in a debt swap.
Welp, just reinforces my desire and plan to buy some gold soon. When everything drops through the fucking floor I'll scoop up some of what will recover. Something really is brewing you can feel it in the air almost.
Ryan Morgan
Fuck, I don't want another 2007/8 crisis
Isaac Nguyen
So another risky bonds, credit default swaps and other bs? Fuck this, fuck the eu really
Tyler Wood
N _ _ _
Landon Taylor
I wonder if this is why they are really going through with Brexit. I always expected them to sabotage it, but perhaps they could smell the fire smoldering, and it's an attempt to survive it by breaking off.
Jaxon Carter
>eu These fuckers deliberatly went in the wrong direction frm the start
told you guys EU was a pyramide scheme
Christian Perez
Not everything is related to Brexit, actually 99 percent of what is going on in the EU is not.
Brexit has been pretty mich finally negotiated already, which is why everyone is so relaxed about it.
Andrew Bell
>without packaging EU state debt, banks and insurance companies would dump Italian and Greek and Belgian and Spanish and even French state debt into the market like crazy. That is how it should be done. Let the market decide and crash the eu and euro with no survivors.
Aiden Butler
This is one way to look at it. But most politicians want Italy to not default, as it would be a major economic crisis.
