Alfie said:
I don't pretend to know anything about how credit default swaps work, what a 50% haircut does (where did the debt go), or why bond rates above 7% is crap (US is 2% is'nt that crap?)
It seems the entire Eurozone looks pretty explosive ATM and could fall up it's collective bottom, if it does explode the entire globe will experience a brown-out
So my questions are:
If Italy is "too big to bail" (3rd or 4th biggest economy in Europe) and their economy does fail, what happens?
My observations about the last GFC was that PM's got hammered along with the rest (Real Estate, Share market etc)
Could Pm's fall to another buy opportunity, and if so will there be available physical to buy?
If Fiat currency values diminish, logic says you have less buying power, so why wait for the brown-out?
Very confused and probably way off track, help please.
Alfie
I was just going to post a message on this too ... and ask questions about what peoples thoughts are but for the facts here they are
- 50% hair cut means, you owe bank $100,000. If you enter various chapters of bankruptcy default, you get a haircut on your debt. So if you owe say $100,000 of unsecured loans to the bank and you get 50% haircut it means that you owe only $50,000 to the bank now. However this isn't a free pass. It means you get a bad record on your credit rating which means getting credit again (for atleast 5 years or so) will be hard for you. So yeh you save $50K but you cant get anymore *cheap credit* This is the haircut. Its a reduction of debt with conditions in place (ie in greeks case austerity measures which you can read up on)
- Credit default swaps are like an insurance policy BUT they arn't. The doozy is that they are supposed to work like your home insurance. Your house catches on fire , you go to insurance company and say hey i wanna claim. You get your money you rebuild your house ALL good. Insurance policies however are REGULATED meaning that there are certain rules around their conditions. CDS's however are OTC which means over the counter. This means that no one really enforces what it says. Its an agreement yeh but there is just lest stringent policy on it then with a home insurance you may take out with AIG or GIO or whatever. In a CDS, the activation is that a DEFAULT is declared and this is the funny part, cause even though there was a 50% hair cut a default WAS NOT DECLARED :lol: So the underwriters (probably big american banks) dont pay out the insurance policy & the german and french banks who bought them as a hedge (against greece actually defaulting and not able to pay back the money) are still in the sh!t. Imagine your house burnt down, you call insurance company, tell them hey i want to claim now and they say ... umm na, your house is fine, it aint burnt down ... so your getting no money (even though you been paying insurance premiums for a number of years)... Im sure Obama was there to help with that decision cause it means it transfers the burden to america directly (if american banks are the underwriters)
- If italy is to big to bail one of two things (and this was the question i was going to pose as well).
1. ECB cranks up the printing press like the US and prints the hell out of the EURO . SO italy sells their bonds to ECB and ECB fires up the press flooding the world with nice euro bills
2. ECB dont fire it up (after tasting its after effects in germany - of which the ECB is actually modeled) and in that case i have NO F@RKIN idea what can happen ... thats anyones guess
But my take is GFC2 , trap door to hell opens for a few days until someone does something ...
- If ECB do not bail out and we get a repeat of 08 because markets get stressed then 100% metals will tank. My assumption is that this blood bath will not be tolerated and after seeing the water in peoples eyes the ECB will eventually fire up the presses. My guess & this is mine BTW is that first a TANK then a PRINT but i could be way of. Thats where my money is, not much of it till there is more news but at the moment its there. Difference with ECB and the FED is that ECB have experience with hyper inflation so they know FIRST hand what it feels like and it wasnt pretty so thats why my money is on no PRINTING then PRINTING .. however this could be so bad that they are forced to
- Will metals get hit if there is this 08 scenario .. history says YES ... biut history could be wrong, you need to decide if this is "not like before" OR if its just history repeating its self. My moneys on a repeat
Italy wont even get any help cause all the monies put together wont be able to backstop their 2Trill in debts only the ECB can do that, French German and other power countries cant pool that much funds together. Just as, if your brother took out a loan for 100K and he cant pay it back and your savings only has 100K .. yeh you could give it to him but what becomes of you !?
You are actually not off at all, they are all the right questions, cause if your goal is to work out if PM's is right or not then those are the questions. You need to take a side and this is the question, WILL ECB print or will italy be left for the dogs ?
Will there be problems buying back from bullion bourse or from my local dealers ... i dont think so , its a matter of opinion so just gotta wait and see when the time comes ... its all a gamble anyway 