Saturday, January 14, 2012

Default, Dear Brutus

The long, slow-motion train wreck of the Euro continues, picking up a bit of speed with the downgrade of a bunch of European debt and the collapse of negotiations to "voluntarily" restructure Greek debt. The point of the so-called voluntary restructuring is to avoid triggering the now notorious credit default swaps (CDS) which continually threaten to send a cascading chain reaction of bankruptcy through the financial world. Why the damnable things - which Warren Buffet called "instruments of mass financial destruction" - were not banned, abolished, and consigned to the lowest depths of financial hell after 2008 I will never understand.
Actually, I do understand, but I just don't like it. They weren't banned because international investment bankers love them - they allow them to make hugely profitable bets with other peoples' money, and stick the losses to taxpayers when they go bust.
It seems increasingly likely that the Merkozy "solution" - austerity with a dash of qualitative easing - is not going to work. Thy've tried A, they tried B - now what?



And today we read about the response:

German chancellor Angela Merkel has called on eurozone governments speedily to implement tough new fiscal rules after Standard & Poor’s downgraded the credit ratings of France and Austria and seven other second-tier sovereigns.
Still barreling down the road to nowhere.