Re: Re: Why did Ireland bother? Don’t they have Trojan horses?


@ozmunky wrote:

…..When I say “bond holders” I mean bond holders of sovereign debt that lend to governments.

The big boys are PIMCO, CALPERS (californian public service workers pension) and the Norwegian sovereign fund from gas & oil that guarantees pensions for school teachers, firemen etc plus the whole spectrum and then those on the secondary euro-sterling market eg. those (like me) that are looking at the Italian Govt 2028 bond paying almost 7% in GBP for example — those that buy and then hold.

Its these guys (and their members) that supply world governments and their populations with financial oxygen for them to provide services and employment.

As Logan correctly says, any default at sovereign level is so short sighted — bit like punching the bank manager in the face in the street when passing.

The credit markets only supply money, its up to local Governments on how they spend it and regulate their affairs (unless as in a personal bankruptcy the IMF is the administrator — loss of sovereignty in the Irish example)

There are 2 points I would like to make:

(i) default/haircuts for senior and sovereign bondholders is not the answer — those dependent on Govt money that is funded will suffer.
Defaults and haircuts are appropriate at the local country level for junior subinordinated local debt (like I have) hence beware of the holder — eg Anglo Irish (which I dont own — my exposure is UK only)

(ii) The Euro will not collapse one country at a time — its either all countries in or all countries out at the same time.
The reason is that the cross border holdings of the banks of the EU are all intertwined with each other to such a degree that if any country attempts to leave will have a wrecked banking system from exposure to everyone else and in a highly devalued local currency when it does it.
To be frank, in order to be free you have to first swallow a cyanide pill and hope its under strength.

Anyway enough for now.

— Munky

It’s not at all like punching your bank manager in the street. It’s like sitting down with your bank manager and saying sorry I can’t pay back all the money you lent me.

And let’s be honest, the big boys like Pimco would take the hit then come back for more before long, albeit at a higher interest rate. They are going to get screwed by lots of Western governments, either by default, currency devaluation, or inflation, and in the end what difference does it make? Didn’t Bill Gross himself said the other day in his funny high-pitch voice that the US debt was like a Ponzi scheme? But who else are they going to lend to? Cuba? North Korea? They’ll be back.