Tuesday, October 11, 2011

Well This Is Hopeful

The Euros are finally talking about taking steps to end the debt crisis.
Oct. 11 (Bloomberg) -- European leaders pushed back a debt- crisis summit amid opposition to Germany's drive for deeper- than-planned Greek bond writedowns that Luxembourg's Jean-Claude Juncker says may exceed 60 percent.

When asked on Austrian television late yesterday to comment on speculation investors may lose between 50 percent and 60 percent of the value of their holdings, Luxembourg's prime minister, said "we're talking about even more." He didn't comment further.
Banks will fail, life savings will be lost, businesses will go under, but their recovery will finally be able to start.


B-Daddy said...

How true. Now if we would just let the U.S. housing market settle to market clearing prices, our own recovery could get started. (Oversimplification, I know, but the point is valid.)

Dstarr said...

It's gonna happen sooner or later. The Greeks are broke, deeply in hock, and still spending more than they take in taxes. The EU bailout is actually a bailout of the European banks that bought Greek bonds. Sooner or later the EU taxpayers will get tired of giving money to banks so stupid as to lend good money to Greece, as opposed to financing economic development.
Europe would be better off if its stupid banks were put out of business. Banks direct society's capital. Eurobanks been pouring European capital down the drain. Lending to Greece does nothing for Europe economic development.
They have some really shaky banks over there too. Dexia, just going belly up, had out standing loans 74 times their capital. And a good chunk of that capital was Greek bonds, which they carry on their books at face value, despite the fact that they are actually worth zilch. Lehman Bros only had 34 times capital out in loans when they croaked. A mere fifteen times capital is the accepted standard for US banks. When the Greeks formally declare default, banks will be forced to revalue the Greek bonds they hold to zero. In effect a chunk of bank "capital" will dissappear, leaving the banks more overextended than they are now.