[Doofy]

YouTube - World Collapse Explained

[turtle777]

Nice

-t

[CRASH HARDDRIVE]

As sad as it is funny.

[reader50]

It's good to see quality news analysis.

[Big Mac]

Excellent.

[Wiskedjak]

I was wondering about exactly this a few years ago and couldn't get past the equivalent of 1:18.

[dcmacdaddy]

Originally Posted by Doofy 

YouTube - World Collapse Explained

Is that the same two guys from the famous The Front Fell Off The Ship "interview"? It looks like them, just older. And the deadpan style is the same.

As for their exchange, it seemed a bit flat but humorous nonetheless.



As for the political implications of their exchange, it was lacking in subtlety: Everyone owes everyone else money but no one has any money to pay back what they owe. Some mutual debt forgiveness* may go a long way towards minimizing the overall debt picture but I can't imagine too many European nations want to engage in such an act for how it might affect their credit (bond) rating.


*County A owes Country Z 50Billion
whereas
Country Z owes Country A 17Billion.

If Country A "forgave" the debt owed to them by Country Z then
Country A's debt to Country Z could be reduced to 33Billion.

[turtle777]

The problem with debt forgiveness is that there are people / organizations that have either Net debt or Net outstanding receivables.

It really isn't possible once you follow debt / credit to the smallest level where it was created.

-t

[Big Mac]

Originally Posted by turtle777 

The problem with debt forgiveness is that there are people / organizations that have either Net debt or Net outstanding receivables.

It really isn't possible once you follow debt / credit to the smallest level where it was created.

Could you elaborate on that, turtle? I know debt can be hard to disentangle given the complex debt instruments used in modern markets, and forgiving debt can have a damaging cascade effect. I get that. But in the end when an investment is made that goes "tits up," it shouldn't mean that everything just grinds to a halt or falls off a cliff. Bankruptcies happen. Debt restructuring happens. Unless the options are abused, they're healthy market clearing mechanisms that help restore financial functionality. Why drag these problems out or let them topple the whole system when they can be dealt with in mature ways? I know bankrupt countries are bigger deals than other types of bankruptcies, but the world does it on smaller scales all the time with entities from major corporations to individuals seeking protection and fresh starts. The lender takes a hair cut by agreeing to be paid back less (or nothing) versus what was owed (according to the recognized limited capacity of the borrower to repay), and the borrower in default takes a credit rating hit (in addition to some other downsides), hopefully having learned something for the future.

I think the rational thing to do is, assuming world leaders are adult about their attitudes toward the world economy, there should be an international system established to come to accords over sovereign debt and to gradually work off sovereign debt world wide. It could be modeled after the international negotiating rounds that reduced tariffs over the last decades. A debt commission modeled after the WTO, perhaps, could be established. (The World Debt Organization, WDO?) Poorer countries who have had debt problems historically would benefit because they could be let off the hook more easily, assuming they were to maintain a commitment to financial reform. The western countries that have overspent in spite of knowing better and having so many more advantages in terms of resources, would have to take more responsibility for their profligate debt appetites and agree to stricter reform constraining deficit spending in the key areas that led them to sovereign debt problems to begin with (military, entitlements, corrupt public union deals, other excessive forms of big government spending etc.). Caps would be placed on spending both in non-emergency and emergency settings; those countries out of compliance would be punished by the WDO until returning to compliance, just like the WTO does for trade violations. Wouldn't something like that work? Am I making sense or failing to see the bigger picture?

[Wiskedjak]

I like the way this new Big Mac thinks.

[Big Mac]

Haha, I'm on a role with Wiskedjak right now. But there's nothing new about this Big Mac. Just perhaps a side of me you haven't noticed before.

[turtle777]

Originally Posted by Big Mac 

Could you elaborate on that, turtle?

Example:

You and me in the US

I lent my bank $ 10,000 in form of savings.
The bank lent it to some Greek dude, who now is in debt for $ 10,000.

You took a car loan from your bank for $ 10,000.
Some greek millionaire "funded" your loan by depositing $ 10,000 in a Money Market account.

On the balance, the "US" lent and owes $ 10,000, same as "Greece".
But you can't just say, well if both the US and Greece owe each other $10,000, let's just wipe it out.

I would be a very unhappy camper.

Originally Posted by Big Mac 

I know debt can be hard to entangle given the complex debt instruments used in modern markets, and forgiving debt can have a damaging cascade effect. I get that. But in the end when an investment is made that goes "tits up," it shouldn't mean that everything just grinds to a halt or falls off a cliff.

Shouldn't ? By what reference point ?

If an investment goes tits up, the lenders are SOL. That's the way it is (or better, should be).
That's why it is important for the lenders to seek appropriate returns, so that their risk taking is worthwhile.

Of course, if you are smart, you don't lend all your money to one person. You make several loans to several people, minimizing the risk that ALL your loans go tits up simultaneously. The returns should cover the losses of a few of your loans go bad.

Originally Posted by Big Mac 

The lender takes a hair cut by agreeing to be paid back less than what was owed, and the borrower in default takes a credit rating hit.

Exactly.

But what happens (like in Greece) is that the credit rating hit is nullified by the ECB buying the junk from Greece.
This takes out the risk of those investments, and suddenly, lenders give Greece money again for too low interest, even though the risk is really still there.

-t

[Doofy]

Let's not forget that everyone owing everyone else money is intentional - it's designed into the system because that's the way TPTB think it best to "bring us all together" and avoid wars and the like. Basically, country A isn't going to go to war with country Z if it owns most of the property there. I'm not sure as to the validity of this statement in International terms, but it's certainly - with no doubt at all - how the EU thinks and operates.

[Doofy]

Originally Posted by dcmacdaddy 

Is that the same two guys from the famous The Front Fell Off The Ship "interview"? It looks like them, just older. And the deadpan style is the same.

No idea, sorry. It's just something I came across on my travels.

[Face Ache]

Originally Posted by dcmacdaddy 

Is that the same two guys from the famous The Front Fell Off The Ship "interview"? It looks like them, just older. And the deadpan style is the same.

MR JOHN CLARKE

[mduell]

The debt isn't held by the sovereigns (remember they're broke and borrowing), but by large institutions. France isn't loaning Greece money, Société Générale is.

[Big Mac]

But it's still termed "sovereign debt," and ultimately governments are responsible for it. Government spending is the cause of the problem, not bank spending.

Ah, fiat currency is all imaginary anyway, right? There is no spoon.

[mduell]

Right, it's the debt of a sovereign, but the counterparty is not a sovereign.