Why Greece Should Reject the Euro

[TCO]

default is the answer. And should have been followed with Fannie Mae and GS and the lot of the deritive players. there is even LESS damage from a financial entity going under than a manufacturing company going concern. It's not like it's that hard to make more of them (low barriars to entry) or that we don't have other ones...

Plus of course, it is the easiest way to cure people from making bad bets.

[KrazyHorse]

default is the answer. And should have been followed with Fannie Mae and GS and the lot of the deritive players. there is even LESS damage from a financial entity going under than a manufacturing company going concern. It's not like it's that hard to make more of them (low barriars to entry) or that we don't have other ones...

Plus of course, it is the easiest way to cure people from making bad bets.

We would have been the last under (perhaps 2nd last after jpm)...

[TCO]

I don't care (or know). There was a lot of finkiness going on with the discount windown and AIG and the conversion to merchant bank status. But whatevs. If you survived great. If not, fine, too.

[TCO]

If someone defaults on a complicated set of trades, fine...unwind them. If it causes issues to unwind the trades (waiting) then that is one of the issues people entering complicated trades need to consider up front. No reason to transfer that liability onto gramma in Nebraska.

And I still don't buy that whole benefit of having to pool 50,000 loans, you were clattering about a while ago. I don't buy that the benefit occurs, (for someone with the availabilty of making other trades, creating othe portfolios). If it does occur, doubt it takes 50,000 loans. Plus I think events show that you misunderestimated the costs of lack of knolwedge of the underlying papers.

[KrazyHorse]

I don't care (or know). There was a lot of finkiness going on with the discount windown and AIG and the conversion to merchant bank status. But whatevs. If you survived great. If not, fine, too.

Dude, accepting a writedown when you have collateral and CDS to cover collateral shortfalls is idiotic.

[KrazyHorse]

If someone defaults on a complicated set of trades, fine...unwind them. If it causes issues to unwind the trades (waiting) then that is one of the issues people entering complicated trades need to consider up front. No reason to transfer that liability onto gramma in Nebraska.

What liability did gramma get?

And I still don't buy that whole benefit of having to pool 50,000 loans, you were clattering about a while ago. I don't buy that the benefit occurs, (for someone with the availabilty of making other trades, creating othe portfolios). If it does occur, doubt it takes 50,000 loans. Plus I think events show that you misunderestimated the costs of lack of knolwedge of the underlying papers.

What events?

[KrazyHorse]

I'm not sure how much credence I put in the Sumnerian thesis. But it is rising while watching events in euroland.

[TCO]

I don't understand your comment.

[TCO]

Gramma: Bailout fund, AIG.

All the kerfuffle about the "danger" of "meltdown"

[KrazyHorse]

Fed fail.

[TCO]

I don't understand this one either.

And do I have to reply with quote for it to stay threaded? Someone changed how the boards work.

[KrazyHorse]

Gramma: Bailout fund, AIG.

All the kerfuffle about the "danger" of "meltdown"

How much did bailout end up costing?

[TCO]

Fed fail.

I don't understand the comment. You will need to make it explicit.

[KrazyHorse]

Note that tips spreads for low expected inflation overestimate expected inflation due to embedded optionality. So failure was even worse than that chart shows

[TCO]

I don't know the direct costs, but there WERE direct costs.

the inderict costs were a ratification of moral hazard, the auto bailout (which would not have happened otherwise) and a huge industrial recession which was the "rational" result of consumers realizing our government played along with moral hazard.

And if it didn't "cost that much", then why do it at all? Why not just let the chips fall?